Pharmstandard announces 2010 sales results

15.02.2011


Moscow, 15 February 2011 – OJSC Pharmstandard (LSE: PHST IL, RTS: PHST RU, MICEX: PHST), announces unaudited consolidated IFRS-compliant sales results for 2010.


Key developments at the Company in 2010

·         Pharmstandard won in the 'Pharmaceutical Industry' nomination category of the national business award competition 'Company of the Year 2010'.¹

·         As in the previous year, Arbidol® remains the best performing retail brand. Arbidol®'s share of the total pharmaceutical retail sales in Russia was 1.5%.²

·         In August 2010, OJSC «Pharmstandard» acquired 100% of the shares of CJSC «Vindexpharm». CJSC «Vindexpharm» owns the Acipol® trademark. Since the closure of the acquisition deal and the beginning of its sales under the Company's brand, sales of Acipol® amounted to RUR 140 million.

According to «Pharmexpert» Market Research Centre, retail sales of the product in 2010 amounted to RUR 337 million which represented an increase of 17.5% in relation to RUR 287 million in 2009.

·         Pharmstandard launched 12 new products: Pentalgin®, Acipol® (capsules), Formetin® (850 mg and 1000 mg tablets), Phosphogliv® forte (capsules), Artrozan® (solution for intramuscular injection 6 mg/ml), Complivit® Calcium D3 forte (tablets), Complivit® Calcium D3 for young children (powder), Complivit® Trimestrum 1,2,3, trimester (tablets), Maxicold® Rino (powder), Selmevit® Intensive (coated tablets).

Sales proceeds of the Company for the products launched in 2010, amounted to RUR 262 million or 1.4% of the Company's organic sales of pharmaceuticals, RUR 140 million of which resulted from sales of Acipol®. It is worth taking into consideration that sales of the majority of the new pharmaceutical products commenced in the 4th quarter of 2010.

·         Pharmstandard registered retail prices for 98 pharmaceuticals produced by the company (taking into account all forms and dosages) included in the Vital and Essential Pharmaceuticals (VEP) List for 2010. The Company's revenue from sales of the pharmaceutical products included in the VEP List reached RUR 9.568 million which accounted for 50.5% of the company's organic sales revenue in 2010.

·         In September 2010, OJSC «Pharmstandard» and State Corporation «ROSTEKHNOLOGII» signed a co-operation agreement. According to the agreement, the Corporation will provide assistance in the implementation of OJSC «Pharmstandard» projects related to (re-)equipment and servicing of high-tech medical facilities at medical establishments in the territory of the Russian Federation.

·         The OJSC «Pharmstandard» and «Johnson & Johnson» LLC entered into mutual agreement and successfully realized the project to localize secondary packaging of the product Velcade® (INN Bortezomib) on the Company`s production facility OJSC «Pharmstandard-Ufavita». The sales of the product in 2010 achieved to RUR3.838 million.

¹ The annual national business award 'Company of the Year' is organized by RBK Holdings.
² According to the data base of Market Research Centre 'Pharmexpert' for 2010.

·         Implementation of biotechnological project GENERIUM:

As of the end of 2010, the total investment in Nauchtech Stroy Plus Ltd. for construction of a R&D centre specialising in development and implementation of bioengineered pharmaceutical and diagnostics products amounted to RUR 630 million, RUR 150 million of which was the equity capital share in Nauchtech Stroy Plus Ltd. Construction and installation works, building communication network and construction of roads within the R&D centre have been completed. Interior furnishing and equipment installation have begun.

 In 2010, RUR 1.799 million worth of CoagilVII(Eptacog Alfa) was supplied. CoagilVII(Eptacog Alfa) is produced within the framework of the joint biotechnology project GENERIUM by CJSC GENERIUM and OJSC Pharmstandard. The product Diaskintest® for the total amount of RUR 135 million (excluding VAT) was supplied under the Federal TB Control sub-programme in 2010.

At present, 5 new pharmaceutical products which are being developed through the joint bio-technology project GENERIUM, are undergoing clinical trials.

In 2011 the Company is planning to invest no less than an additional RUR 150 million in the completion of the R&D center construction. By the end of 2011, laboratories of molecular biology, cellular technology and bio-chemistry will be operational; 41 residential buildings for R&D personnel accommodation, a cultural and business center, a general communications network and municipal amenities will be competed.

 Key Developments at the Company in 2011

·         On 18 January 2011 OJSC Pharmstandard-Leksredstva announced an offer to purchase up to 1,850 of OJSC Pharmstandard shares at RUR 3000 per ordinary share. This proposal is valid from 16:00 Moscow time on 18 January 2011 till 18:30 Moscow time on 16 February 2011 provided the Company does not decide to extend the proposal term.

·           On 19 January 2011 the Company announced its purchase of 55% of shares in PJSC Biolek. Pharmstandard used its own assets to finance acquisition of the shares. PJSC Biolek is a Top-20 Ukrainian pharmaceutical company and specializes in the production of immunobiological drugs, vaccines, serums, diagnostics products, nutrient mediums, blood products, hormonal, antiviral, antibacterial and enzymatic drugs. The Biolek`s revenue for 2010 was RUR 547 million (UAH 143 million¹) which represents an increase of 34.7% over RUR 406 million (UAH 106 million¹) for the previous year.

 ¹As per Central Bank rate on 31.12.2010: UAH 10 = RUR 38.28.

 
Russia's Pharmaceutical Market in 2010 and 2011.

On 1 September 2010 the basic provisions of Federal Law No. 61-FZ «On the Circulation of Pharmaceuticals in the Russian Federation» came into force.

In October 2010, Russian Federation Government Decree No. 1660-r introduced Federal Target Programme «Development of the Pharmaceutical Industry of the Russian Federation for the period until 2020» which established a policy of support for national producers and substitution of imported products. The Programmer’s funds have been allocated to construction of new and modernisation of existing production facilities and the introduction of GMP standards. Investment funds: $5.675 million.

 One of the most significant developments affecting the Russian pharmaceutical market, was the introduction of price regulation which resulted in negative dynamics of prices for most pharmaceutical products. This led to growing consumer demand, yet somewhat slowed down the rate of market growth in value terms. The state sector has enjoyed an increase in sales of expensive high-tech pharmaceuticals. In 2011 the growth in purchase of expensive pharmaceuticals will continue; it is likely that purchase of Russian-produced pharmaceuticals (including that of high-tech products) will also increase which will keep in check the growth of prices in the hospital sector. In 2011, the growth in value terms will amount to 12-17%. According to the Market Research Centre«Pharmexpert»: “Should the market follow a realistic scenario in the following years, it would be reasonable to expect its steady development with an annual growth of 18-22%. By 2015, the volume of the Russian pharmaceutical market will reach $42-48 billion”.

The primary trends of market development in a realistic scenario will be: increase of the share of high-tech pharmaceuticals in the volume of Government procurement; increase of the share of locally produced pharmaceuticals in all the sectors of the pharmaceutical market; new generation pharmaceuticals will be rapidly replacing old-fashioned products in the structure of the commercial re tail sector.

According to the Market Research Centre «Pharmexpert»: “A new scheme of medicine provision for a number of regions is scheduled to be launched in 2012. Its objective is direct reimbursement of the cost of pharmaceutical products to the pharmacies. This project will become a point of departure in the process of creating the system of drug insurance”.

We expect that in the following year the market will continue growing in value terms, though a significant “burst” in physical indicators is unlikely to happen. Nevertheless, it is clear that the demand for medicines will grow if the economic situation in the Russian Federation improves.

The Company’s sales results for 2010*

According to the unaudited accounts, sales proceeds of the Company in 2010 grew by 23.3% and amounted to RUR 29.719 million which is RUR 5.624 million more in comparison to RUR 24.095 million in 2009.

The share of pharmaceutical sales of the Company accounted for 97.9% of the total revenue. Pharmstandard's revenue from sales of medical equipment accounted for 2.1% of company's total sales.

·       Total sales increase for pharmaceutical products (taking into account third-party products) was 24.3% or RUR 5.682 million; sales volume of pharmaceutical products was RUR 29.089 million.

·       Organic increase in sales of pharmaceutical products (without third-party products) was 11.5% or RUR 1.979 million, totaling RUR 19.229 million.


OTC products (organic sales of the Company¹)

The Company's revenue from the sales of OTC products reached RUR15.633 million for 2010 which represented an increase of 5.3% or RUR 792 million over the results for 2009. This increase was primarily driven by Arbidol®, Pentalgin®,Complivit®, Codelac®, Flucostat®, Afobazol® and Amixin®.

It is important to take into account that in the 4th quarter of 2009 Russia experienced a high incidence of the pandemic H1N1 influenza strain. The epidemic caused a significant increase in the consumption of cold and antiviral medicines by the population of the Russian Federation. It is due to this factor that organic revenue of the Company from the sale of OTC pharmaceuticals in 4th quarter of 2009 increased by 105% or RUR 3.159 million over the same period of 2008. The contribution of Arbidol® to the OTC products revenue in the 4th quarter of 2009 was 71% or RUR 2.229 million. There was a decrease in the sales of Arbidol® in 4th quarter of 2010 over the same period of 2009. However, overall annual sales of Arbidol® amounted to RUR 5.589 exceeding their revenue of RUR 5.503 million in 2009.

 Product

4Q 2008

4Q 2009

4Q 2010

Changes 4Q 2009/2008

Changes 4Q 2010/2009

Arbidol

RUR 703,5 mln

RUR 2,932   mln

RUR 1,739   mln

316%

RUR 2,229 mln

-40.7%

RUR -1,194 mln

 

“We’ve managed to maintain what we achieved last year, bearing in mind that at the end of 2010 there was no flu pandemic in Russia. We also provided the population of the country with antiviral drugs, in a timely fashion and without shortages, for the prevention and treatment of cold-related illnesses,” said Pharmstandard’s CEO Igor Krylov.

In January 2011, weekly epidemic thresholds were observed to have been exceeded within the population in 59 constituents of the Russian Federation², which, in the opinion of the company managers, will affect the sales dynamics for antiviral products circulating in the Russian pharmaceutical market in the 1st and 2nd quarters of 2011.

RX Prescription Products (organic sales of the Company¹)

The Company's revenue from sales of prescription products reached RUR 3.308 million in 2010 increasing by RUR 970 million or 41.5% over RUR 2.338 in 2009. This increase was primarily driven by Phosphogliv®, Rastan®, Biosulin®, Combilipen®, Cocarboxylase Hydrochloride, Pikamilon®, Cyclodol® and Octolipen®.

Rastan® grew by 136% or RUR 254 million and its sales volume reached RUR 439 million. The product is supplied under the federal 7 nosologies programme. Octolipen® recorded the most dynamic rate of growth. It grew by 224% and and its sales volume reached RUR 93 million over RUR 29 million in 2009.

*The sales data is based on the figures of product dispatch to distributors
¹ Due to the increase in company's revenue from sales of third party products, managers of the company decided to have a separate entry for this area of activity in the overall structure of company's sales (starting from 2010). 
² According to the Federal Supervision Agency for Customer Protection and Human Welfare dated 01.02.2011

TPP (Third Party Products)

The sales of third party products have grown by 60.2% or RUR 3.703 million and reached RUR 9.860 million. The share of TPP in the overall structure of the Company's sales in 2010 was 33.2%.

The following products have become best-sellers: Velcade® (Johnson & Johnson), CoagilVII (CJSC GENURIUM\CJSC “Lekko”), Mildronate® (Grindex), Prezista® (Janssen-Cilag), Pulmozyme® (Hoffmann-La Roche), IRS 19® and Imudon® (Abbott Products).

There are different types of third party products:

Manufacturing of TPP at the company's facilities
Velcade® (Johnson & Johnson), IRS 19® and Imudon® (Abbott Products). The Company's revenue from sales of these products in 2010 amounted to RUR 4.372 million.

Distribution, promotion of TPP
Mildronate® (Grindex), Prezista® (Janssen-Cilag) and other products. The revenue from sales of these products in 2010 amounted to RUR 2.752 million.

Participation with TPP in open auctions 
CoagilVII (CJSC «GENURIUM»\CJSC «Lekko»), Pulmozyme® (Hoffmann-La Roche) and other products. The revenue from sales of these products in 2010 amounted to RUR 2.736 million.

 The share of more expensive innovative pharmaceuticals, including those locally produced, in the structure of Government procurement has increased. The Government will continue with its innovation friendly policies in 2011.

Export sales

Export of the company's pharmaceutical products in 2010 increased by 38.8% and amounted to RUR 593 million over RUR 427 million in 2009. The share of Top-10 exported pharmaceuticals amounts to 79% (RUR 472 million) of the Company's revenue from export. The Top-10 exported pharmaceuticals include Arbidol®, Complivit®, Cocarboxylase Hydrochloride, Pentalgin®, Afobazole®, Sulphacamphocain, Citramon P, Ingalipt®, Activated carbon, Phosphogliv®.

The Company exports its products to 14 countries, mostly to CIS and former SU countries: Ukraine (41.8%), Uzbekistan (34.8%), Belarus (7.7%). The pharmaceutical export share in the overall sales structure of the Company in 2010 was 2%.

The Company's strategic planning includes active development and expansion of its export business in Ukraine, in Latin and South America (Venezuela, Argentina, Nicaragua), in Africa (Nigeria, Egypt), in countries of the Near and Middle East (Iran, Iraq, Afghanistan, UAE).

Sales of medical equipment

 In 2010 the company's revenue from the sales of medical equipment amounted to RUR 630 million. Despite a reduction in sales in 2010 compared to 2009 by 8.5%, it would be reasonable to say that this segment of the Company's business has stabilised, considering that in 2009 reduction in sales of medical equipment compared to 2008 was 36%.

*The sales data is based on the figures of product dispatch to distributors

Pharmstandard revenue structure in 2010 (including third parties products)

SALES IN 2010

2010 (RUR mln)

% of total sales

2009(RUR mln)

% of total sales

Growth in 2010/2009        (RUR mln)

Growth in        2010/2009 (%)

Pharmaceuticals

29,088.9

97.9%

23,406.7

97.1%

5,682.2

24.3%

Produced by Pharmstandard

18,940.9

63.7%

17,178.8

71.3%

1,762.1

10.3%

OTC

15,632.9

52.6%

14,840.7

61.6%

792.2

5.3%

Branded

13,381.4

45.0%

12,709.9

52.7%

671.5

5.3%

Non-branded

2,251.5

7.6%

2,130.8

8.8%

120.8

5.7%

Rx

3,308.0

11.1%

2,338.1

9.7%

969.9

41.5%

Branded

2,819.7

9.5%

2,022.4

8.4%

797.3

39.4%

Non-branded

488.4

1.6%

315.7

1.3%

172.6

54.7%

Third parties products

9,859.9

33.2%

6,156.4

25.5%

3,703.6

60.2%

Velcade®

3,838.2

12.9%

3,661.9

15.2%

176.3

4.8%

Coagil®

1,799.5

6.1%

0.0

0.0%

1,799.5

-

Mildronate®

1,211.7

4.1%

1,194.3

5.0%

17.3

1.5%

Prezista®

942.5

3.2%

0.0

0.0%

942.5

-

Pulmozim®

610.2

2.1%

143.9

0.6%

466.4

324.1%

IRS®-19, Imudon®

533.5

1.8%

645.6

2.7%

-112.1

-17.4%

Other Third parties products

924.4

3.1%

510.6

2.1%

413.8

81.0%

Other sales

288.0

1.0%

71.5

0.3%

216.5

302.6%

Medical equipment sales

630.2

2.1%

688.7

2.9%

-58.5

-8.5%

Total sales of Pharmstandard

29,719.1

100.0%

24,095.4

100.0%

5,623.7

23.3%

 

Organic structure of Pharmstandard revenue in 2010 (without third parties products) 

Sales in 2010 WITHOUT TPP

2010   (RURmln)

% of total sales

2009 (RURmln.)

% of total sales

Growth in        2010/2009              (RURmln)

Growth in              2010/2009 (%)

Pharmaceuticals

19,229

96.8%

17,250.3

96.2%

1,978.6

11.5%

Produced by Pharmstandard

18,940.9

95.4%

17,178.8

95.8%

1,762.1

10.3%

OTC

15,632.9

78.7%

14,840.7

82.7%

792.2

5.3%

Branded

13,381.4

67.4%

12,709.9

70.9%

671.5

5.3%

Non-branded

2,251.5

11.3%

2,130.8

11.9%

120.8

5.7%

Rx

3,308.0

16.7%

2,338.1

13.0%

969.9

41.5%

Branded

2,819.7

14.2%

2,022.4

11.3%

797.3

39.4%

Non-branded

488.4

2.5%

315.7

1.8%

172.6

54.7%

Other sales

288.0

1.5%

71.5

0.4%

216.5

302.6%

Medical equipment sales

630.2

3.2%

688.7

3.8%

-58.5

-8.5%

Total sales of Pharmstandard

19,859.1

100.0%

17,939.0

100.0%

1,920.1

10.7%

 

 Notice of 2010 sales results announcement date

Moscow, 14 February, 2011 – OJSC Pharmstandard (LSE: PHST LI, RTS: PHST RU, MICEX: PHST) will be announcing its 2010 sales results on Tuesday, 15 February 2011 at 10:00 AM Moscow time.

For reading report 2010 Sales Results please use the link below:
http://www.pharmstd.ru/investors_en/press-center/press-releases/

Pharmstandard is pleased to invite the investment community to a sales results conference call with the management of the company followed by a Q&A session.

Tuesday, February 15, 2011
09:00 New York
14:00 London
17:00 Moscow

To join the conference please register on-line in advance using the link below: https://eventreg1.conferencing.com/webportal3/reg.html?Acc=097741&Conf=176898

or dial:

International Call-in Number: +44 (0)20 7162 0025

US Toll Number: +1 334 323 6201
We recommend that participants start dialling in 5-10 minutes prior to ensure a timely start to the conference call.

Conference call presentation will be available on Tuesday, 15 February 2011 on Company’s web-site:http://www.pharmstd.ru/investors_en/investor/p2/

Pharmstandard will be represented by:

Igor Krylov, CEO
Elena ArkhangelskayaCFO
Ilya Krylov, IR

The conference call replay will be available through February 22, 2011.
International Replay Number: +44 (0)20 7031 4064
US Toll Replay Number: +1 954 334 0342
Replay Access Code: 886605

Contacts:
OJSC Pharmstandard
Ilya Krylov
Tel: +7 495 970 0030 ext 2416
E-mail: IR@pharmstd.ru
www.pharmstd.com 


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Marina Shurkina


Head of Administrative Division Pharmstandard JSC

+7 (495) 970 0032
pr@pharmstd.ru

5B, Likhachyovsky Proezd, Dolgoprudny, Moscow Region, 141701, Russia

+7 (495) 970 0030/32

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