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Third Parties Pharmaceuticals (TPP)

In 2011, Pharmstandard won a number of open auctions with respect to the 7 nosologies programme* and other federal programmes organised by the Ministry of Healthcare and Social Development of the Russian Federation which are designed to meet the demand of those Russian citizens who require costly pharmaceutical products.

There is a definite tendency, at present, of foreign pharmaceutical companies actively developing co-operation with Russian partners within the framework of the Development Strategy for the Pharmaceutical Industry of the Russian Federation for the Period until 2020. The main reasons for this are the stable and growing pharmaceutical sales in the Russian Federation and the continued transfer of know-how for localisation of the manufacture of pharmaceutical products previously absent in the Russian market.

A perfect example of this is the co-operation between Roche (Switzerland) and the group of companies Pharmstandard (Russia) which resulted in the beginning of localised production of Mabthera (rituximab) in the Russian Federation a year ago. This partnership succeeded in successfully transferring the final stage of manufacture of this original biotechnological product to OJSC Pharmstandard-UfaVITA (Ufa, the plant is a part of the group of companies Pharmstandard).

This by no means is the only example of such co-operation. For instance, at present, the group of companies Pharmstandard carry out the secondary packaging, the full-cycle production and the marketing support for promotion of such famous products owned by foreign and Russian companies, as Mabthera®, Velcade®, IRS®-19 and Imudon®, Prezista®, Mildronate®, Coagil VII etc.

In 2011, sales of third-party products (TPP) grew by 119.6% or RUR 11,832.1 million and amounted to RUR 21,726 million. The share of TPP sales in total sales in 2011 was 50.9% (in 2010 it was 33%). The following products were the main growth drivers: Mabthera®, (RUR 8,239.3 million), Velcade® (RUR 3,596.4 million), Coagil VII (RUR 1,707.3 million), Pulmozyme® (RUR 1,612.1 million), IRS®-19 and Imudon® (RUR 1,312.6 million), Prezista® (RUR 1,243.6 million), Mildronate® (1,071.8 million).

The reason for this significant change in the shares of organic (46.5% in 2011 vs 64.9% in 2010 of total pharma sales) and TPP (52.5% in 2011 vs 34.0% in 2010 of total pharma sales) products was the change in the supply timescale. For example, according to the terms with respect to the state open auctions won by the Company in 4Q2010, additional supply and cash collections related to these sales under the contracts with the Ministry of Healthcare and Social Development took place during 1Q2011and 2Q20011.But in 4Q2011 the Ministry of Healthcare and Social Development organised open auctions for the procurement of products within the framework of the 7 nosologies programme, to meet the demand in pharmaceutical products in 2012 for the amount of RUR 21 billion (inclusive of VAT), with a provision that the products should be supplied by the end of 2011.

As a result, sales of TPP in 4Q2011 amounted to RUR 9,986.6 million, an increase of 165% or RUR 6,212.9 million. The share of TPP in 4Q2011 was equal to 45.9% of total TPP sales for the previous year. It is worth mentioning that despite the tight timescale, all supplies of pharmaceutical products related to the state open auctions won by the Company in the fourth quarter of 2011 were delivered in full and on time, and cash collections related to these sales were received in full before 31 December 2011.

According to Federal Law 323-FZ On the Fundamentals of Health Protection of Russia's Citizens, the authority of the Russian Federation with respect to the organisation of Russian citizens' provision with pharmaceutical products under the 7 nosologies programme, is going to be transferred to the Russian federal subjects, as of 1 January, 2014. This will lead to state open auctions being held in each constituent region (at present, there are 83 such regions in Russia) which, in turn, is going to affect the way prices for the relevant pharmaceutical products are formed, as well as the timing and the volume of pharmaceutical products' supply.

Umbrella

brand

OTC

2011

2010

Change

sales

% of TPP

sales

% of TPP

mln RUR

%

Velcade

RX

3 596,4

16,6%

3 838,2

38,8%

-241,7

-6,3%

Coagil VII

RX

1 707,3

7,9%

1 799,5

18,2%

-92,2

-5,1%

Mildronate

RX

1 071,8

4,9%

1 211,7

12,2%

-139,8

-11,5%

Prezista

RX

1 243,6

5,7%

942,5

9,5%

301,1

31,9%

Pulmozyme

RX

1 612,1

7,4%

610,2

6,2%

1 001,9

164,2%

IRS-19, Imudon

OTC

1 312,6

6,0%

533,5

5,4%

779,1

146,0%

Mabthera

RX

8 239,3

37,9%

0,0

0,0%

8 239,3

-

Reduxin


1 459,5

6,7%

490,3

5,0%

969,2

197,7%

Other TPP


1 483,3

6,8%

467,9

4,7%

1 015,4

217,0%



21 725,97

100%

9 893,82

100%

11 832,15

120%

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