Pharmstandard OJSC reports its 1H2013 sales results

25.07.2013

Moscow, July 25, 2013 – Pharmstandard OJSC (LSE: PHST IL, RTS: PHST RU) (further “Pharmstandard” or the “Company” announces its unaudited 1H2013 sales results.

1H2013 sales data includes numbers for Pharmapark LLC, Biomed named after I.I. Mechnikov OJSC and LEKKO CJSC acquired in 2012 (further “New Companies”).

As of January 1, 2013 100% of TZMOI OJSC sales are included into the Company’s revenue.

Sales highlights.

· In 1H2013 Pharmstandard sales reached RUR16 436m demonstrating RUR270m or +2% y/y growth, compared to RUR16 166m in 1H2012

· In 1H2013 Pharmstandard sales excluding third party products (further “TPP”) reached RUR 10 544m demonstrating RUR2 141m or +25% y/y growth, compared to RUR8 403m in 1H2012

· Pharmaceutical products and medical equipment accounted for 97.2% and 2.8%. of the Company’s total sales in 1H2013, respectively

· In 2Q2013 Pharmstandard sales reached RUR7 292m falling RUR718m or -9% y/y, compared to RUR8,010m in 2Q2012

· In 2Q2013 Pharmstandard sales excluding TPP reached RUR4 467m demonstrating RUR443m or +11% growth y/y, compared to RUR4 024m in 2Q2012

1H2013 key highlights and developments

· Over-the-counter spin-off. On July 5, 2013 Company’s Board of Directors agreed to announce the extraordinary shareholder meeting (further “ESM”) to discuss Company reorganization, i.e. a spin-off of Company’s branded over-the-counter business (further “OTC”) into a separate legal entity whose shares will be proportionally distributed among the shareholders of the Company (further «NewCo»). In the course of the last several years the Company has significantly diversified its business within the Russian pharmaceutical market and stopped being just an OTC focused company: in 2012 71% of the total revenue came from TPP, Rx, Medical Equipment and Other. The main strategic rationale for the spin-off in management’s view is disclosure of the most adequate and proper value of OTC business to all of its shareholders. OTC business will have a separate experienced management team led by Olga Mednikova, presently Head of Marketing at Pharmstandard. Company’s management believes that going on forward the reorganization will allow achieving better results in growing both parts of our businesses – OTC and Rx. OTC business revenue reached RUR12 662m in 2012 which is 25% of the Company total revenue.

· The ESM on the spin-off of OTC will take place on September 27, 2013.

· Potential acquisition of 100% shares of Bever Pharmaceutical PTE LTD (further «Bever Pharma”). On July 5, 2013 Company’s Board of Directors agreed to announce an extraordinary shareholder meeting (further “ESM”) to discuss a potential acquisition of 100% share capital of Bever Pharma for US$630m. Bever Pharma holds exclusive rights for supply of active pharmaceutical ingredients (further “API”) for production of Arbidol® and Aphobazolum® at a fixed price. Following this acquisition, the Company will decrease its API procurement costs. The Company is currently in the process of due diligence of Bever Pharma and negotiations of key terms of the transaction and envisages to obtain customary for the transaction of this nature fairness and legal opinions from major international professional firms. Agreed price for Bever Pharma will be, among other things, subject to final due diligence findings.The Company envisages to sign definitive transaction documentation ahead of ESM and will provide full disclosure on key terms of the transaction. If approved by ESM, Bever Pharma will be acquired by the Company and will ultimately become part of NewCo. ESM on acquisition of Bever Pharma will take place on August 17, 2013.

· Buyback Program. On February 15, 2013 Company’s Board of Directors approved a buyback program in respect of ordinary shares of Pharmstandard OJSC and/or Global Depositary Receipts representing Shares (each GDR representing 4 Shares) (further the “Program”) in the aggregate amount of up to RUR8bn. Duration of the Program was until December 31, 2013. On July 17, 2013 the Company announced the completion of the Program in the course of which 15 009 162 GDRs and 140 000 ordinary shares were purchased on the open market as of July 16, 2013. Any Shares and GDRs acquired pursuant to the Program may be used for purposes of financing the Company's operations or for M&A transactions.

New shareholder structure is as follows: Augment Investments Limited – 54.3185% (ordinary shares and GDRs); LSE – 17.64% (GDRs); RTS/MICEX – 9.31% (ordinary shares); Pharmstandard-Leksredstva OJSC – 18.7392% % (ordinary shares and GDRs).

Pharmaceutical products. Sales results.

Pharmaceutical sales in 1H2013 increased by RUR186 million (+1%) up to RUR15 972m vs RUR15 786m in 1H2012, with organic sales accounting for 60%, TPP for 37% and API for 3% in the pharmaceutical sales mix.

Organic pharmaceutical sales in 1H2013 amounted to RUR9 567m (+23%) vs RUR7 771m in 1H2012 with 69% accounted for by OTC products and 31% by Rx products.

Organic prescription product (Rx) sales in 1H2013 grew by RUR672m (+30%) to reach RUR2 932m. Key growth drivers were Biosulin®, Combilipen® and Formetine®.

Organic over-the-counter (ОТС) product sales in 1H2013 went up to RUR6 635m (+20%). In 1H2013 Arbidol® demonstrated 75% growth vs 1H 2012 reaching RUR1 136m in sales.

TPP sales in 1H2013 went down to RUR5 892m (-24%) (vs RUR7 764 million in 1H2012).

Production localization. 7 Nosologies Federal Program.

TPP sales decrease in 1H2013 is directly attributed to production localization segment decline due to lack of government purchases via public auctions under 7 Nosologies Federal Program. This particularly relates to zero sales for Presista® that accounted for 54% of the total TPP sales a year before, as well as decrease in 1H2013 sales of both Presista® and Intellence® with their auctions being moved to regional levels.

Aggregate sales of production localization segment EXCLUDING Velcade® remained almost flat y/y.

For 2H2013 the auctions are announced for Infibeta®, Coagil®, Mabthera®, Velcade® , Pulmozyme® and Rastan® for the total amount of RUR1 430m. This sum may be subject to change.

Brand	Category	1H 2013		1H 2012		Change
Brand	Category	Sales, RURm	% of TPP sales	Sales, RURm	% of TPP sales	RURm	%
Mabthera®	Rx	536	9%	388	5%	147	38%
Coagil-VIII	Rx	414	7%	69	1%	345	500%
Revlimid	Rx	415	7%	187	2%	228	123%
Infibeta®	Rx	202	3%	0	-	202	-
Presista®	Rx	233	4%	935	12%	-702	-75%
Intellence®	Rx	89	2%	295	4%	-206	-70%
Velcade®	Rx	0	-	2 346	30%	-2 346	-100%
*Other TPPs*	Rx	*146*	2%	*161*	3%	*-15*	-9
Total for the group	Rx	2 035	35%	4 381	56%	-2 347	-54%
Total TPPs	Rx	5,892	100%	7,764	100%	-1,872	-24%

Commercial segment

Commercial TPP sales reached RUR3 857m (+14%) primarily driven by Reduksin®, Tamiflu and Atimos.

Brand	Category	1H 2013		1H 2012		Change
Brand	Category	Sales, RURm	% of TPP sales	Sales, RURm	% of TPP sales	RURm	%
Reduxin®	OTC, Rx	1 445	25%	1,275	16%	170	13%
IRS-19®, Imudon®	Rx	516	19%	158	2%	358	227%
Mildronate®	OTC	420	7%	474	6%	-54	-11%
Tamiflu	Rx	210	9%	41	1%	169	409%
Atimos®	Rx	56	1%	6	0,1%	50	856%
*Other TPPs*	OTC, Rx	1 *211*	*55%*	*1,429*	*75%*	*-218*	*-15%*
Total for the group	OTC, Rx	3 857	65%	3,382	44%	475	14%
Total TPPs	OTC, Rx	5 892	100%	7,764	100%	-1,872	-24%

Medical equipment sales as of 1H2013 amounted to RUR464m (+22%).

Pharmstandard OJSC sales structure, 1H2013

1H2013 SALES	1H2013 (RURm)	% of total sales	1H2012 (RURm)	% of total sales	1H2013/ 1H2012 y/y growth (RURm)	1H2013/ 1H2012 y/y growth (%)
Pharmaceutical products	15 972	97.6%	15 786	97,6%	186	1%
PHS production	9 567	48.1%	7 771	48,1%	1 797	23%
*OTC*	*6 635*	*34.1%*	*5 511*	*34,1%*	*1 124*	*20%*
Branded	5 366	27.8%	4 496	27,8%	869	19%
Non-branded	1 270	6.3%	1 015	6,3%	255	25%
Rx	*2 932*	*14.0%*	*2 260*	*14,0%*	*672*	*30%*
Branded	2 524	11.5%	1 866	11,5%	657	35%
Non-branded	408	2.4%	393	2,4%	15	4%
TPP	5 892	48.0%	7 764	48,0%	-1 872	-24%
Other sales – substances	512	1.6%	252	1,6%	261	103%
including New Companies	805	5%	-	-	100%	100%
Medical equipment	464	2.4%	380	2,4%	84	22%
Pharmstandard Group total sales	*16 436*	*100.0%*	*16 166*	*100,0%*	*270*	2%

Pharmstandard OJSC sales structure (excl.TPP), 1H2013

1H2013 SALES EXCL. TPP	1H2013 (RURm)	% of total sales	1H2012 (RURm)	% of total sales	1H2013/ 1H2012 y/y growth (RURm)	1H2013/ 1H2012 y/y growth (%)
Pharmaceutical products	10 080	95,6%	8 023	95,5%	2 057	26%
PHS production	9 567	90,7%	7 771	92,5%	1 797	23%
*OTC*	6 635	62,9%	5 511	65,6%	1 124	20%
Branded	5 366	50,9%	4 496	53,5%	869	19%
Non-branded	1 270	12,0%	1 015	12,1%	255	25%
Rx	2 932	27,8%	2 260	26,9%	672	30%
Branded	2 524	23,9%	1 866	22,2%	657	35%
Non-branded	408	3,9%	393	4,7%	15	4%
Other sales – substances	512	4,9%	252	3,0%	261	103%
including New Companies	805	5%	-	-	100%	100%
Medical equipment	464	4,4%	380	4,5%	84	22%
Pharmstandard Group total sales	*10 544*	*100%*	*8 403*	*100,0%*	*2 141*	*25%*

Pharmstandard OJSC sales structure, 2Q2013

2Q2013 SALES	2Q2013 (RURm)	% of total sales	2Q2012 (RURm)	% of total sales	2Q2013/ 2Q2012 y/y growth (RURm)	2Q2013/ 2Q2012 y/y growth (%)
Pharmaceutical products	7 108	97%	7 805	97,4%	-696	-9%
PHS production	4 028	55%	3 696	46,1%	333	9%
*OTC*	*2 586*	*35%*	*2 544*	*31,8%*	42	2%
Branded	2 060	28%	2 030	25,3%	31	2%
Non-branded	525	7%	514	6,4%	11	2%
Rx	*1 443*	*20%*	*1 151*	*14,4%*	*291*	*25%*
Branded	1 261	17%	988	12,3%	273	28%
Non-branded	182	2%	164	2,0%	18	11%
TPP	2 825	39%	3 986	49,8%	-1 161	-29%
Other sales – substances	255	3%	123	1,5%	132	107%
including New Companies	450	6%	-	-	100%	100%
Medical equipment	184	3%	206	2,6%	-22	-11%
Pharmstandard Group total sales	7 292	100%	8 010	100,0%	-718	-9%

Pharmstandard OJSC sales structure (excl.TPP), 2Q2013

2Q2013 SALES (EXCL.TPP)	2Q2013 (RURm)	% of total sales	2Q2012 (RURm)	% of total sales	2Q2013/ 2Q2012 y/y growth (RURm)	2Q2013/ 2Q2012 y/y growth (%)
Pharmaceutical products	4 283	96%	3 819	94,9%	465	12%
PHS production	4 028	90%	3 696	91,8%	333	9%
*OTC*	2 586	58%	2 544	63,2%	42	2%
Branded	2 060	46%	2 030	50,4%	31	2%
Non-branded	525	12%	514	12,8%	11	2%
Rx	1 443	32%	1 151	28,6%	291	25%
Branded	1 261	28%	988	24,5%	273	28%
Non-branded	182	4%	164	4,1%	18	11%
Other sales – substances	255	6%	123	3,1%	132	107%
including New Companies	450	6%	-	-	100%	100%
Medical equipment	184	4%	206	5,1%	-22	-11%
Pharmstandard Group total sales	4 467	100%	4 024	100,0%	443	11%

OTC business sales structure, 1H2013

In the light of the BoD approval of OTC spin-off we believe that it is useful to disclose potential NewCo 1H2013 sales structure and y/y dynamics of the 27 brands that will constitute NewCo business if approved by ESM.

BRAND	1H2013 (RURm)	% of total sales	1H2012 (RURm)	% of total sales	1H2013/ 1H2012 y/y growth (RURm)	1H2013/ 1H2012 y/y growth (%)
Amixin®	474	8.6%	268	6.1%	206	77%
Arbidol®	1,136	20.5%	651	14.8%	485	75%
Asvitol®	47	0.8%	38	0.9%	9	22%
Ascophenum-P®	71	1.3%	58	1.3%	13	21%
Aphobazolum®	469	8.5%	297	6.8%	172	58%
Acipol®	264	4.8%	181	4.1%	83	46%
Aerovit®	2	0,03%	2	0.04%	0	-4%
Klarisens®	6	0.1%	8	0.2%	-2	-29%
Codelac®	259	4.7%	277	6.3%	-17	-6%
Complivit®	728	13.2%	665	15.1%	63	9%
Lactazar®	12	0.2%	9	0.2%	3	33%
Lactonorm®	3	0.1%	0	-	3	-
Magnelis B6®	127	2.3%	81	1.9%	46	56%
Maxycold®	34	0.6%	14	0.3%	19	133%
Medira®	1	0.01%	5	0.1%	-4	-89%
Next®	62	1.1%	7	0.2%	55	824%
Neosmectin®	47	0.9%	37	0.8%	10	27%
Nitrocor®	16	0.3%	18	0.4%	-1	-8%
Noopept®	60	1.1%	0	-	60	-
Pentalgin®	1,036	18.7%	1,197	27.3%	-160	-13%
Rinostop®	81	1.5%	63	1.4%	19	30%
Selmevit®	69	1.2%	60	1.4%	9	15%
Spasmol®	2	0.04%	3	0.1%	-1	-33%
Termicon®	99	1.8%	84	1.9%	14	17%
Flucostat®	399	7.2%	353	8.1%	46	13%
Ciklovita®	6	0.1%	0	-	6	-
Cinocap®	20	0.4%	15	0.3%	5	32%
Total:	5,529	100%	4,391	100.0%	1,138	26%