Information under Article 39 of the Accountancy Act

An overview of the company’s performance and the main risks it faces (Art. 39, para 1 of the Accountancy Act /

Key financial indicators
Indicators 1-12/2021 1-12/2020 Change
BGN ’000 BGN ’000 %
Revenues 1 603 310 1 438 826 11.4%
EBITDA 116 706 92 433 26.3%
Operating profit 63 519 45 800 38.7%
Net profit 91 703 25 280 262.7%
CAPEXacquired tangible and intangible long-term assets 43 538 41 720 4.4%
31.12.2021 31.12.2020
BGN ’000 BGN ’000
Non-current assets 633 746 629 935 0.6%
Current assets 571 232 612 177 -6.7%
Owners’ equity 658 868 566 595 16.3%
Non-current liabilities 122 218 131 066 -6.8%
Current liabilities 423 892 544 451 -22.1%
Indicators 1-12/2021 1-12/2020
EBITDA/ Revenues 7.3% 6.4%
Operating profit/Sales Revenue 4.0% 3.2%
Net profit/ Sales Revenue 5.7% 1.8%
31.12.2021 31.12.2020
Debt/ Equity 0,83 1,19
Net debtnet debt includes bank loans and leasing and factoring liabilities less cash, taking into account the effects of the adoption of IFRS 16 Leasing, effective from 1 January 2019./ EBITDA on annual basis 2,5х 4,3x


On 11 March 2020 the World Health Organization declared a COVID-19 pandemic, and on 13 March 2020 the Bulgarian Parliament imposed a state of emergency in Bulgaria, as a result of which a number of restrictive measures were taken.

On 24 March 2020, the State of Emergency Act was promulgated, imposing measures for the period of the pandemic state of emergency in various areas — employment relations and social security, taxation and annual financial closure, default and forced execution, terms and deadlines, etc.

On 10 April 2020 the Bulgarian National Bank ("BNB") approved a "Procedure for deferral and settlement of payables due to banks and their subsidiaries — financial institutions, in relation to the state of emergency imposed by Parliament on 13 March 2020″ (the "Procedure"), resulting from the COVID-19 pandemic and consequences thereof.

As a result of the restrictions imposed in Bulgaria and in most countries around the world, the normal operations of businesses in a number of economic sectors was disrupted. There were difficulties with the supplies of raw and other materials from suppliers, shipments to clients, and procuring workforce. Almost all entities, though to a different extent, had to impose certain actions and measures to reorganize business operations, work schedules, business communications and other aspects of their relations to counterparts, partners, and state institutions.

Impact on the Group’s operations and financial position

The Group operates in the production and distribution of pharmaceuticals sector, whose normal functioning was not significantly affected by the restrictive measures applied.

Even though there is an increase in the Group’s sales revenue by BGN 164,484 thousand or 11,4%, as a whole, operating volumes in 2021 were also affected by the pandemic situation in Bulgaria and the other countries it has business connections and relations with.

The management has not dismissed personnel and has not made use of the measures introduced by the State of Emergency Act ("60:40″, etc.).

The Group continues to perform its business activities without significant difficulties in procuring asset supplies (materials, goods, machines, equipment, etc.), and to perform sales to customers.

The Group’s management continues to currently monitor for risks, respectively, consequences of the pandemic on the business. At this stage, no indicators have been identified that result in suspension of significant decrease in the Group’s operations, nor are such planned, and no significant circumstances have been identified that would necessitate such measures or restrictive actions by the management.

Risks related to the Group’s business and the industry the Group operates in

  • The Group faces significant competition;
  • Part of Sopharma Trading’s revenues in Bulgaria is generated from sales to state hospitals, which predetermines a high degree of business risk;
  • The Group is dependent on regulatory approvals;
  • Government regulations affecting the Group’s business may change, thus possibly increasing compliance costs or otherwise affecting its operations;
  • Part of the Group’s revenues, in particular in Bulgaria, depends on the inclusion of the Group’s medicines in reimbursement lists;
  • The Group’s production facilities and processes are subject to strict requirements and regulatory approvals that may delay or disrupt the Group’s operations;
  • The Company’s ability to pay dividends depends on a number of factors and there can be no guarantee that the Company will be able to pay dividends in accordance with its dividend policy or at all in any given year;
  • The Group is subject to operational risk, which is inherent to its business activities;
  • The Group is subject to numerous environmental and health and safety laws and regulations and is exposed to potential environmental liabilities;
  • Litigations or other out-of-court proceedings or actions may adversely affect the Group’s business, financial position and results of operations.

Risks, related to Bulgaria and other markets in which the Group operates

  • The macroeconomic environment, particularly in Bulgaria, Russia and Ukraine, has a significant effect on the Group’s operations and position;
  • The political environment in Bulgaria and in the export markets, especially Russia, Belarus and Ukraine, has a significant effect on the Group operations and financial position;
  • Risks related to the Bulgarian legal system;
  • Developing legal frameworks in some countries in which the Group sells its products, in particular Russia, Belarus and the Ukraine, may negatively impact the Group’s operations in these countries;
  • Risks relating to exchange rates and the Currency Board in Bulgaria;
  • Interpretations of tax regulations may be unclear and tax laws and regulations applicable to the Group may change.

Currency risk

The Group companies perform their activities in active exchange with foreign suppliers and customers and are therefore exposed to currency risk.

Through the companies in Belarus and Ukraine, the group carries out business operations in these countries and, accordingly, has substantial exposures in Belarusian rubles and Ukrainian hryvnia. The currency risk is related to the negative movement of the exchange rates of these currencies against the Bulgarian lev in the future business operations, the recognized assets and liabilities in foreign currency and the net investments in foreign companies. The rest of the companies abroad sell mainly on local markets, leading to currency risk and against their currencies — the Serbian dinar and the Polish zloty.

In order to control the currency risk, a system of planning of import deliveries, for foreign currency sales, as well as procedures for daily monitoring of movements in the dollar exchange rate and control of forthcoming payments, is introduced. The exposure of subsidiaries in Bulgaria in foreign currency is insignificant, as almost all sales are made on the local market in Bulgarian leva. Imports of goods are fully realized in euro. Borrowings denominated in foreign currency are mainly denominated in euro.

Analysis of financial and non-financial key performance indicators of the Group /Article 39, item 2 of the Accountancy Act/

Sales revenues

Sales revenues of the Group increased by BGN 164,5 million or 11.4%, reaching BGN 1 603,3 million in 2021 compared to BGN 1 438,8 million in 2020. Sales of goods increased by BGN 159,5 million or 13%, reaching BGN 1 328,4 million in 2021 compared to BGN 1 168,9 million in 2020. Sales of finished products increased by BGN 5 million, or 1.9%, to BGN 274,9 million in 2021 compared to BGN 269,9 million in 2020.

Other operating revenues increased by BGN 1,2 million to BGN 13,8 million in 2021 compared to BGN 12,7 million in the previous period.

Operating expenses

For the current period more significant changes are reported in personnel expenses, which increased by BGN 16,5 million and depreciation and amortization expenses, which increased by BGN 6,6 million. The main reason is the acquisition of new pharmacy companies at the end of the last year. The external service expenses decreased by BGN 4,9 million. The most significant part of this decrease is due to decrease of manufacturing expenses from subcontractors, by BGN 1,8 million. There was also a decrease in other expenses by BGN 1,9 million.

Financial income and expenses

Financial income and expenses in 2021 net registered a loss of BGN 5,2 million, which is a decrease of the loss by BGN 8,9 million compared to the same period of the last year. This change is primarily the result of the net foreign exchange loss registered last year on foreign currency loans and lease agreements of BGN 5,5 million, which is mainly due to the depreciation of the Belarusian ruble and its effect on debt exposure in euros and dollars of the Group companies in Belarus. In the current period, the net profit from exchange rate differences on foreign currency loans and lease agreements amounts to BGN 1,5 million. Interest expenses on loans received also decreased by BGN 2,2 million.

Financial result from the activity

Earnings before interest, taxes and depreciation (EBITDA) increased by BGN 24,3 million or by 26.3%, while in 2021 it amounted to BGN 116,7 million compared to BGN 92,4 million in 2020. The increased profit margin of the sold goods by 1.7% to 13.9% compared to 2020 has a positive impact, largely due to the acquired new pharmacies in the Group at the end of last year.

Profit from operating activities increased by BGN 17,7 million or by 39%, to BGN 63,5 million in 2021 compared to BGN 45,8 million in 2020.

Net profit increased by BGN 66,4 million or 263% to BGN 91,7 million in 2021 compared to BGN 25,3 million in the nine months of 2020. In addition to the effect of operating activities, the reduced financial expenses as a result of exchange rate losses, as well as the profits reported during the current period from associates in the amount of BGN 12,1 million and the gains from acquisitions and disposals have a more significant positive impact of shares in subsidiaries in the amount of BGN 37,6 million, which are a consequence of the sale of the shares in Briz Latvia and all Belarusian companies.


Non-current assets increased by BGN 3,8 million. There is decrease registered due to the written-off carrying amount of tangible and intangible assets on disposal of investment in subsidiaries. The acquired tangible and intangible fixed assets for the period amounted to BGN 43,5 million. Investments in associates and joint ventures increased by BGN 64,5 million as a result of the additionally acquired shares and the reclassification of "Sopharma Imoti" REIT as an associated and "Momina Krepost" AD as a joint venture on the one hand, as well as from the reported share in the current profit and the increased share in the associated company "Doverie-obedinen holding" AD.

Current assets increased to BGN 40,9 million, mainly due to the decrease of trade receivables with BGN 22,9 million and the decrease of inventories with BGN 31,6 million, while cash increased by BGN 12,4 million.

Owners’ equity and liabilities

The equity of Sopharma Group increased by BGN 94,3 million compared to 31.12.2020 as a result of the reported net current profit and other capital components (warrants).

The liabilities decreased by BGN 129,4 million compared to the end of 2020. Total liabilities on bank loans, leasing and factoring of the Group decreased by BGN 94,7 million, as the net debt after deduction of cash and cash equivalents decreased with BGN 107,3 million to BGN 292,9 million. The trade liabilities decreased by BGN 21,4 million compared to the end of the last year. The decrease in liabilities is a result of both the generated free cash flow and the release of shares in subsidiaries in Latvia and Belarus and, respectively, the non-consolidation of liabilities in these companies.

Cash flows
BGN ’000
BGN ’000
Net cash flows from operating activities (75 963) (179 411)
Proceeds of amounts by factoring after interest and fees 193 337 243 507
Purchases of property, plant and equipment, intangible assets, net (26 055) (24 814)
Payments under lease agreements (20 477) (16 790)
Free cash flow (normalized) 70 842 22 492

The free cash flow (normalized with the revenues from factoring and payments under leasing contracts), generated for 2021, amounts to BGN 70,8 million inflow compared to BGN 22,5 million outflow in 2020.

Ecology and environmental protection

"Sopharma" AD maintains and observes its commitments in compliance with the national legislation in the field of environmental protection. The company applies measures to:

  • separate collection of waste, minimization, recovery and recycling of production and household waste;
  • provide appropriate personnel training on environmental and pollution prevention issues;
  • responsibly fulfill the imperative requirements of the Packaging and Waste Ordinance and pays its product tax in accordance with Regulation for Packaging and Wastage from Packaging;
  • measure annual emissions of waste gases into the ambient air from the Solid Form Factory;
  • once every two years, own periodic measurements (STI) of waste gases in the atmospheric air are carried out at the Steam Power Plant Installation at sites "A" and "B". Emissions are measured and reported in 2021.
  • "Sofiyska Voda" AD measures on a monthly basis emission in wastewater at production sites A and B.
  • every quarter the drinking water from the production plants is given for testing (short chemical and microbiological analysis) in an accredited laboratory;
  • twice a year the groundwater and wastewater are given for testing in an accredited laboratory according to the permits for water abstraction and for use of surface water body.

In 2021 the separately collected waste decreased by 0.3% compared to the previous year. Production waste is disposed with licensed recyclers. The annual emissions of waste gases into the ambient air as well as the emissions in the wastewater are within the required standards. The requirements of the Discharge Permit are fulfilled. Once a month, a report is made on the packaging imported and / or marketed by type of material for which a monthly installment is paid to "EcoBulpak" AD, with which "Sopharma" AD has concluded a contract for the recovery of packaging waste.


As at 31 December 2021, the average number of employees of Sopharma Group is 5 507 (compared to 5 796 in 2020). The average number of employees of "Sopharma" AD as at 31 December 2021 is 1 860 (at 1 991 in 2020) and of "Sopharma Trading" AD is 826 (compared to 799 in 2020).

Significant events occurring after the date of preparation of the annual financial statements /Article 39, paragraph 3 of the Accountancy Act/

On February 24, 2022, Russian military forces started hostile invasion in Ukraine. Subsequently, a number of countries imposed sanctions on certain individuals and legal entities in Russia. It is expected that the war in Ukraine and related economic sanctions and other measures taken by governments around the world will have a significant impact on both local and global economies.

The management of Sopharma AD believes that the unprovoked invasion of the Russian army into Ukraine could seriously affect the activities of the Company, as about 40% of sales of products are realized in Ukraine and Russia. At this stage, the company has reduced its activity in these markets, including due to logistical inability to make deliveries. As of the date of approval of these separate financial statements, the Company has no commercial counterparties included in sanctions lists published by the European Union.

The company owns investments in two subsidiaries in Ukraine. As of December 31, 2021 the amount of the investment in the subsidiary Sopharma Ukraine is BGN 9,669 thousand and the amount of the investment in the subsidiary Vitamini is BGN 1,283 thousand. As of the date of approval of these separate financial statements the assets of these subsidiaries companies are not physically affected by military activities, but it may be necessary in the future to reconsider the value of these investments depending on the development of the war and its impact on the activities of companies.

As of December 31, 2021 the Company has trade receivables from a company, which is selling production of Sopharma AD in Russia in the amount of BGN 11,729 thousand. As of the date of approval of these separate financial statements the Company has received payments for these trade receivables in full.

Despite the potential negative economic effects of the war and the likelihood to escalate into a long conflict, the Company has sufficient current assets and funding to continue to exist as a going concern.

There are no other material events occurring after December 31, 2021 that require additional adjustments and/or disclosures in the consolidated financial statements as at December 31, 2021.

Future development of Sopharma Group (article 39, item 4 of the Accountancy Act) and planned economic policy in the following year (Article 247 (3) of the Commerce Act)

  • On the local market, the Group aims to provide patients with more affordable treatment by registering new generic products in shorter terms.
  • On the foreign markets, efforts are focused on preserving and increasing the share of the Group in the main markets (Russia, Ukraine and Poland), as well as establishing and expanding market positions in other countries (Middle and Eastern Europe and Caucasus region).
  • The Group continues the policy of active partnership with established international pharmaceutical companies, with new companies, as well as expanding the product range of already established collaborations.
  • Optimization of the product portfolio.

Research and development (article 39, item 5 of the Accountancy Act)

The Group focuses its research and development mainly on generic products. Research and development projects are focused on finding and developing new formulas and composition or physical properties (such as medicine form or tablet form) of a product in order to adapt it to current market needs.

The Parent Company mainly submits applications for new product authorizations including new product forms in Bulgaria and / or export markets and for existing products in new markets.

Intellectual Property

Although oriented towards generic pharmaceutical products, "Sopharma" AD has been known for years with the traditional production of several unique products based on plant extracts obtained from own-produced technologies. These products are protected not only by trademark, but also by patent or company know-how.

Regarding the generic products it produces, for their market distinctiveness, Sopharma Group relies on brand names, all of which are registered trademarks of the Company.

In all the years of existence, Sopharma Group has generated and defended its industrial property. As a result, the Group owns a large number of industrial property sites, the majority of which — registered rights (trademarks, patents, designs) and fewer unregistered objects — mainly technology.

These assets are the result of the Group’s special policy towards product and technological update, and in particular innovation.

New developments and products

During the reporting period January — December 2021 in the Division "Development and Regulatory Compliance" the following activities were performed:

New registrations and re-registrations / changes

New registrations of medicinal products

Received 18 Authorizations for the use of medicinal products for new destinations, namely:

  • Ambrolytin 30 mg tablets (Estonia);
  • Dexketoprofen Sopharma 50 mg/2 ml solution for injection/infusion (Poland);
  • Alyssum 7 mg / ml syrup (Romania).
  • Ambrolytin 30 mg tablets (Bulgaria);
  • Ambrolytin Max 30 mg/5 ml syrup (Poland);
  • Vitamin B6 Sopharma 25 mg film-coated tablet (Azerbaijan);
  • Vitamin B Complex 5 mg/1 mg/5 mg/50 mg/ml solution for injection (Kazahstan);
  • Zondaron 2 mg/ml solution for injection/infusion (Moldova);
  • Broncholytin Ivy 7 mg/ ml syrup (Uzbekistan);
  • Deavit Neo 0,5 mg/ ml oral drops, solution (Uzbekistan).
  • License:

  • Xabanel 10; 15; 20 mg film-coated tablets (Bulgaria);
  • Rosuvastatin Sopharma film-coated tablet — 10 mg, 20 mg (Bulgaria).
  • Carsil 22,5 mg film-coated tablets (Bulgaria);
  • Betagamma 50mg/50mg/0,5mg10mg solution for injection (Bulgaria);
  • Broncholytin 40 mg tablets (Uzbekistan);
  • Sophalor 5 mg film- coated tablets (Uzbekistan);
  • Talert 10 mg film- coated tablets (Uzbekistan);
  • Hellituspan syrup (Peru).

Documentation has been submitted for the registration of 32 medicinal products to agencies of new destinations.

Food additives
  • 15 nutritional supplements have been notified — 9 for Bulgaria; 3 for Serbia and 2 for the Ukraine.
Re-registrations / changes
  • Renewed Marketing Authorizations for 45 medicinal products.
  • Submission of documentation for the renewal of the Marketing Authorizations for 70 medicinal products.
  • 573 changes for medicinal products approved by agencies.
  • 496 changes for medicinal products submitted to agencies.
  • Pharmaceutical development of 6 new medicinal products / projects is underway:
    • Citisinicline 3,0 mg tablets – Project with the company Achieve;
    • Suxamethonium 10 mg/ml solution for injection;
    • Suxamethonium 20 mg/ml solution for injection;
    • Keterolac 30 mg/ml solution for injection; 1 ml;
    • Sodium picosulfate 7,5 mg/ml oral drops;
    • Dexketoprophenum 25 mg tablets.
  • The development of Glycerax Pico oral drops has been completed.
  • 1 active substance is being developed.
Transfer and validation of technological processes
  • 1 medicinal product and 2 food supplements were transferred.
  • 20 medicinal products / active substances have been transferred/are in the process of transfer.
  • 19 production processes / technologies have been validated/optimized.

Information on the acquisition of own shares required by Article 187d of the Commerce Act/ Article 39, Item 6 of the Accountancy Act/

In the current year 4,043,533 treasury shares were purchased and no shares sold. The treasury shares purchased during the year amount to 3% of the Company’s share capital and the average acquisition price is BGN 4,12 per share.

Shares Equity, net
of treasury shares
Number BGN ’000
Balance at 1 January 2020 125 684 432 100 656
Sold back Treasury shares 253 748 949
Treasury shares repurchased (151 748) (461)
Expense on treasury shares - (2)
Balance at 31 December 2020 125 786 432 101 142
Treasury shares repurchased (4 043 533) (16 546)
Expense on treasury shares —  (82)
Balance at 31 December 2021 121 742 899 84 514

The Board of Directors is authorized to buy treasury shares under certain conditions, according to the decisions of the GMS, held on 23 June 2010, of the EGMS from 30 November 2011, of the EGMS from 1 November 2012, of the EGMS from 28 February 2013 and of the EGMS from 23 February 2018.

Number and nominal value of the own shares held and the proportion of the capital they represent

"Sopharma" AD holds 13,055,000 treasury shares, representing 9.68% of the company’s capital.

Existence of branches of the Company /Article 39, item 7 of the Accountancy Act/

"Sopharma" AD has no branches.

Use of financial instruments /Article 39, item 8 of the Accountancy Act/

Overall risk management focuses on the difficulties in predicting financial markets and minimizing potential negative effects that may affect the financial performance and position of the Group.

Financial risks are currently identified, measured and monitored by various control mechanisms introduced to determine adequate prices for the group’s products and services and borrowed capital and to adequately assess the market circumstances of the investments made by them and forms of maintenance of the free liquid assets, without allowing unjustified concentration of risk.

Risk management is carried out on an ongoing basis by the management of the parent company and respectively the management of the subsidiaries in accordance with the policy defined by the Board of Directors. The Board of Directors has adopted basic principles for general financial risk management, on the basis of which specific procedures have been developed for the management of individual specific risks, such as currency, price, interest, credit and liquidity, and the risk of using non-derivative instruments.

Credit risk

Credit is the risk that the clients of the Group will not be able to pay fully and within the usual time limits the amounts due from them under the trade receivables. Trade receivables are presented in the statement of financial position in net amount after deducting the accrued impairment for doubtful and bad debts. Such impairments are made where and when there are events identifying loss of collectability under previous experience.

The Group has developed policies and procedures for assessing the creditworthiness of its counterparties and setting credit rating and credit limits by group of clients.

Cash in the Group and the payment operations are concentrated in various premium banks. In the distribution of cash flows between them, the management of the Company and the subsidiaries take into account a number of factors, including the capital, security, liquidity, credit potential and rating of the bank, etc.

Liquidity risk

The liquidity risk is expressed in the negative situation that the Group will not be able to meet unconditionally all its obligations according to their maturity, including due to the presence of over-inflation, and the indexation of trade accounts for companies operating in such an environment.

The Group generates and maintains a sufficient volume of liquidity. An internal source of liquidity for the Group is the main business of its companies generating sufficient operating flows. External sources of funding are banks and other permanent partners.

Risk of interest-bearing cash flows

In the structure of the Group’s assets, interest-bearing assets are represented by the cash at floating rate and the loans granted at a fixed interest rate. On the other hand, the borrowed funds of the Group in the form of long-term and short-term loans are usually with variable interest rates. This circumstance partly puts the cash flows of the Group in line with interest rate risk. The coverage of this risk is achieved in two ways:

  1. optimizing sources of credit resources to achieve a relatively lower cost of borrowed funds;
  2. combined structure of interest rates on loans, which contains two components — fixed and variable, the ratio between which and their absolute value can be achieved and maintained at a favorable rate for the companies in the Group. The fixed component has a relatively low absolute value and a large enough relative share in the total interest rate. This circumstance eliminates the probability of a significant change in interest rates with a possible update of the variable component. This also minimizes the probability of a change in the unfavorable direction of cash flows.

The management of the companies in the Group together with the management of the Company are currently monitoring and analyzing its exposure to changes in interest rates. Different scenarios of refinancing, renewal of existing positions and alternative financing are simulated. Based on these scenarios, the effect on financial result and equity is measured when changing with certain points or percentages. For each simulation, the same assumption of interest rate change applies to all major currencies. Calculations are made for significant interest-bearing items.