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«The Company of Decade - the Russian pharmaceutical products manufacturer»

Procurement

Pharmstandard procures and supplies raw materials, including auxiliary materials and packaging, for the purpose of manufacturing its own and third party products at production facilities of the Pharmstadard group of companies.

As at 31 December 2011, 420 types of raw materials had been purchased in the amount of RUR 6.1 billion, including active pharmaceutical ingredients (API) in the amount of RUR 5.2 billion. 72.3% of raw materials for pharmaceutical production are purchased primarily in China, Europe, India and in some other countries, because either most of these types of raw materials are not produced in Russia or, if they are, their quality does not comply with the requirements of international standards or they are not produced in sufficient quantity to meet our requirements.

The following table shows procurement structure for the purpose of manufacturing its own products:

Nomenclature

2010, %

2011, %

Raw materials

88.5%

86.3%

API

80.7%

80.8%

Other materials

7.8%

5.5.%

Auxiliary materials

0.2%

0.2%

Packaging

11.3%

13.5%

Total materials and supplies

100.0%

100%

In 2011, the US dollar assumed the role of the main currency of contract denomination and amounted to 66.7% (in 2010 it was 66.4%) in the currency structure.

Throughout 2011, the currency rates were subject to conflicting trends. For example, in 1Q2011 and 2Q2011 our experts registered a gradual loss in USD value, in relation to the Russian rouble, in 3Q2011 the rate of USD went up to RUR 32.52, and in 4Q2011 conflicting trends prevailed.

These fluctuations in USD and Euro rates did not contribute to any significant losses for the Company related to the procurement of raw materials.

The following table shows breakdown of procurement contracts for the purpose of manufacturing its own products by currency:

Currency

2010

2011

Euro

15.7%

12.8%

US Dollar

66.4%

66.7%

Russian rouble

17.9%

20.5%

Total

100%

100%

 Selling API in the Russian market

In 2011, Pharmstandard continued the development of its business specialising in

wholesale of API supplied directly by foreign manufacturers, primarily from China, India and Western Europe.

In 2011, RUR 358,7 million worth of API were sold in the Russian market, an increase of 32.1% vs 2010 (RUR 271,5).

In 2011, the nomenclature of supplied API expanded from 59 to 86 names; about 114 contracts were signed.

ТОР 10 

List of API

Value, RUR, mln (non incl. VAT 10%)

Metamizole sodium

55.426

Paracetamol

23.628

Chloramphenicol

22.765

Omeprazole

18.153

Pancreatin

17.653

Rutin

14.498

Acetylsalicylic acid

12.490

Azithromycin dihydrate

12.476

Ascorbic acid

11.723

Verapamil hydrochloride

11.277

The development strategy for 2012:

  • to increase the volume of sales;
  • to improve the quality of Customer service by means of optimisation of paperwork and shipment of goods from warehouses;
  • to increase the number of customers;
  • to expand the range of goods;
  • to monitor and control accounts receivable.
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