JSC Pharmstandard reports 2010 and 1Q2011 sales results

28.04.2011

Moscow, 28 April, 2011 – JSC Pharmstandard (LSE: PHST IL, RTS: PHST RU) reportsits audited 2010 sales results, in compliance with IFRS and non-audited sales results for 1Q 2011.

In 2010, Net profit increased by 4.5% and amounted to RUR 7,163.8 million.

Sales revenue in 1Q 2011 grew by 103.8% in relation to 1Q 2010 and reached RUR 11,670.2 million.

2010 Key Highlights

Revenue grew by 23.2% and amounted to RUR 29,686.6 million;

Gross profit increased by 10.7% and amounted to RUR 12,985.8 million, or 43.7% of sales;

EBITDA [1] grew by 0.5% and amounted to RUR 9,685.2 million, or 32.6% of sales;

Net profit grew by 4.5% and amounted to RUR 7,163.8 million, or 24.1% of sales.

Key developments at the Company in 2010 and at the beginning of 2011:

  • In 2010, OJSC "Pharmstandard" came second on the Russian pharmaceutical market  among all the manufacturers with the market share 4.2%

  • Since 2007, Pharmstandard has been, and remains at present, an unquestionable leader in the retail segment among all the domestic manufactures, with the market share 20.3%.

  • 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
  • Pharmstandard launched 12 new products: Pentalgin® (without codeine), 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 249.2 million or 1.3% of the Company's organic sales of pharmaceuticals, RUR 140.7  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.

¹ The annual national business award 'Company of the Year' is organized by RBK Holdings.
² According to the data base of «Pharmexpert» Market Research Centre – Monitoring of Retail Drug Sales in Russia.

  • OJSC Pharmstandard and Johnson & Johnson LLC entered into a mutual agreement and successfully realized a project to localize secondary packaging of the product Velcade® (INN Bortezomib) at the Company`s production facility at OJSC Pharmstandard-Ufavita. Sales of the product in 2010 amounted to RUR3,838.2 million.
  • 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 its own 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.
  • Consequent to the inspections conducted at the manufacturing facilities of three subsidiaries of the Company (OJSC "Pharmstandard-Leksredstva"; OJSC "Pharmstandard-Ufavita"; OJSC "Pharmstandard-Tomskhimpharm"), they received certificates confirming their compliance with the requirements of ISO 9001-2008 in the areas of development and manufacturing of pharmaceuticals.
  • 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 modernization and servicing of high-tech medical facilities at medical establishments in the territory of the Russian Federation.
  • 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 Acipol® sales under the Company's brand, its sales amounted to RUR 140.7 million.
    According to «Pharmexpert» Market Research Centre, retail sales of the product in 2010 amounted to RUR 337 million which represented an increase of 17.4% in relation to RUR 287 million in 2009.
  • Nauchtech Stroy Plus Ltd (Implementation of biotechnological project GENERIUM):

    As of the end of 2010, the total investment in NauchtechStroy Plus Ltd. for construction of a R&D centre specializing 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 NauchtechStroy 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 has begun. By the end of 2011, laboratories of molecular biology, cellular technology and bio-chemistry will be launched into operation; 41 residential buildings for R&D personnel accommodation, a cultural and business center, a general communications network and municipal amenities will be completed.”
  • 23 March 2011, Pharmstandard comes top of the list of the most influential domestic pharmaceuticals producers¹, according the annual “Rating of Russian Pharmaceutical Manufacturers”.
  • On18 February 2011, OJSC “Pharmstandard-Leksredstva” announced to its shareholders who had submitted applications to sell shares, the number of accepted shares offered by them for sale, following the review of such applications from shareholdersDuly offered ordinary shares are expectedto be paid for no later than on 15 April 2011.
  • On 18 January 2011 OJSC “Pharmstandard-Leksredstva” announced an offer to purchase up to 1,850 thousand 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 specialises in the production of immunobiological drugs, vaccines, serums, diagnostics products, nutrient mediums, blood products, hormonal, antiviral, antibacterial and enzymatic drugs. The Company's revenue for 2010 was RUR 547 million (UAH 143 million²) which represented an increase of 34.7% vs RUR 406 million (UAH 106 million²) for the previous year.

¹“Rating of Russian Pharmaceutical Manufacturers” is organised by “PharmatsevecheskyVestnik” newspaper in conjunction of “Pharmexpert. Analysis and Consulting”.
² As per Central Bank rate on 31.12.2010: UAH 10 = RUR 38.28.

 

2010 financial results

Sales of product

In 2010, total sales amounted to RUR 29,686.6 million, which is 23.2% above the corresponding 2009 figure (RUR 24,095.4 million).

Sales of pharmaceutical products and medical equipment and disposables account for 97.9% and 2.1% of the total sales, respectively.

Pharmaceuticals

In 2010, revenue from sales of pharmaceuticals grew by 24.1% and amounted to RUR 29,056.1 million, in comparison with RUR 23,406.7 in 2009. Sales growth amounted to RUR 5,649.5 million.

In the sales structure, the sales of the pharmaceuticals manufactured by the Company and the sales of third parties pharmaceuticals occupy 63.6% and 33.4% respectively.

Sales of Pharmstandard's own products in 2010 increased by 9.9% or RUR 1,696.5 and amounted to RUR 18,875.3.

In the structure of sales of Pharmstandard's own products the share of OTC drugs amounted to 78.7% and the share of Rx drugs occupied 16.6%.

The revenue from the sales of the OTC products increased by RUR 740.4 millionor 5% and totalled RUR 15,581.1 million in 2010. Arbidol®,Pentalgin®, Complivit®,Flucostat®, Afobazol® and Amixin® were the top-selling brands.

In 2010, sales of prescription drugs (Rx) manufactured by Pharmstandard grew by 40.9% or RUR 956.1 million and totalled RUR 3,294.2 million. Phosphogliv®, Rastan®, Biosulin®, Combilipen®, Cocarboxylase HydrochlorideBiosulin® andPicamilon® were the top-selling brands.

In 2010, sales of third parties products grew by 60.7% or RUR 3,737.5 and reached RUR 9,893.8 million. The biggest share of the proceeds from TPP sales in 2010 related to the sales of Velcade®(Janssen-Cilag), Coagil® (CJSC LEKKO), Mildronate®(Grindex), Prezista®(Janssen-Cilag International N.V.), Pulmozyme(F.Hoffman-La Rosche Ltd), IRS® 19 and Imudon® (Solvey pharmaceuticals). According to the overall structure of the company's sales approved in 2009, due to the increase in the company's revenue from sales of TPP, this area of activity is represented as a separate entry (since 2009).

Medical equipment

In 2010, the volume of sales of medical equipment and disposables decreased by RUR 58.2 million, or by 8,5%, and amounted to RUR 630.5 million vs RUR 688.7 million in 2009. There was a tendency for slowing down of the rate of the volume decrease in this segment

(-8.5% in 2010 vs -36.0% in 2009). This segment is primarily financed through state open auctions, and 2010 was a year when the situation with such financing improved.

Gross profit

Gross profit of the Company increased by RUR 1,258.3 million or 10.7%: from RUR 11,727.5 million in 2009 to RUR 12,985.8 in 2010. In relation to sales, total gross profit decreased from 48.7% in 2009 to 43.7% in 2010. This decrease was primarily due to a higher share of third parties products in the sales structure in 2010 in relation to 2009, and to their lower margin as compared to the Company's own products.

Operating expenses

Operating expenses increased by RUR 633.8 million or 20.0% from RUR 3,174.4 million in 2009 to RUR 3,808.2 million in 2010. In relation to sales, operating expenses decreased from 13.2% in 2009 to 12.8% in 2010.

Selling and distribution costs (S&D) 

Selling and distribution costs (S&D) in 2010 increased by RUR 453.1 million or 18.4% and amounted to RUR 2,916.2 million vs RUR 2,463.1 million in 2009, which represents 9.8% and 10.2% of sales in the respective years. Organic S&D (excluding third parties products expenses) in relation to sales amounted to 13.6% in 2010 vs 13.0% in 2009.

General and administrative expenses (G&A)

General and administrative expenses (G&A) in 2010 increased by RUR 180.7 million or 25.4%, from RUR 711.2 million in 2009 to RUR 891.9 million in 2010 (i.e. 3% of the overall sales volume, as in 2009).

Other expenses and other income

The other expenses in 2010 was RUR 300.8 million vs other income in 2009 which amounted to RUR 105.3 million. This change was due to the following factors: (1) certain expenditures on financing construction of various infrastructure objects by “Nauchtechstroy Plus” (NTS+)presented as other expenses andamounted toRUR 248.3 million; (2) recognition of the expenses connected to the decision of the management to close down the production line of disposable products at OJSC "TZMOI".

EBIDTA
EBIDTA amounted to RUR 9,685.2 million or 32.6% of the overall Company’s sales. EBIDTA’sgrowthwas 0.5% inrelationto 2009 EBIDTAwhat is the evidence of effective company management.

Financial income and financial expense

Our financial expense decreased by RUR 98.3 million or 67.3% from RUR 146.0 million in 2009 to RUR 47.7 million in 2010.This was primarily due to the decrease in the balance of the Citibank syndicated loan, as per agreement concluded in 2006, scheduled for full repayment in 2011.

Financial income in 2010 grew by RUR 182.3 million and totalled RUR 315.2 million vs RUR 132.9 million in 2009. Such significant gain in financial income was due to the gain in fair value of interest rate swap and also to the interest income from cash deposits.

Profit for the year and non-controlling interest

In 2010, the Company’s profit grew by RUR 311.3 million or 4.5% and amounted to RUR 7,163.8 million in comparison to RUR 6,852.4 million in 2009. These figures represent 24.1% and 28.4% of sales for the respective years. It is worth noting in this respect that the Company's profit without the contribution of TPP accounted for 31.2% of organic sales in 2010 vs 33.9% in 2009.

Profit from organic sales in the pharmaceutical segment amounted to RUR 6,179.2 million representing 32.2% of such sales.

In 2010, profit attributable to the equity holders of the Parent Company was RUR 7,149.5 million. Profit for the year due to non-controlling interests amounted to RUR 14.2 million payable to the minority shareholders of OJSC Pharmstandard-Tomskhimpharm with 9% voting shares.

Consolidated statement of financial position as at 31 December 2010
(in thousands of Russian Roubles)

 

2010

2009

Assets

 

 

Non-current assets

 

 

Property, plant and equipment

4,168,079

3,685,845

Intangible assets

6,686,210

6,162,135

Prepayment for subsidiary acquisition

184,072

-

 

11,038,361

9,847,980

Current assets

 

 

Inventories

7,466,214

2,758,691

Trade and other receivables

12,376,059

9,289,082

VAT recoverable

480,142

258,932

Prepayments

219,621

136,729

Short-term financial assets

 3,682,023

1,133,287

Cash and short term deposits

4,156,258

2,798,160

 

28,380,317

16,374,881

 

 

 

Total assets

39,418,678

26,222,861

 

 

 

Equity and liabilities

 

 

Equity attributable to equity holders of the parent

 

 

Share capital

37,793

37,793

Treasury shares

-

(6)

Foreign currency translation reserve

(245)

-

Retained earnings

26,409,993

19,243,766

 

26,447,541

19,281,553

Non-controlling interest

428,214

413,961

Total equity

26,875,755

19,695,514

 

 

 

Non-current liabilities

 

 

Long-term borrowings and loans

-

391,511

Deferred tax liability

642,334

807,062

Derivative financial instruments

11,249

34,751

Other non-current liabilities

-

24,197

 

653,583

1,257,521

 

 

 

Current liabilities

 

 

Trade and other payables and accruals and advances received

10,747,197

3,905,979

 

 

 

Current portion of long-term borrowings

395,823

391,360

Income tax payable

223,006

403,961

Other taxes payable

523,314

568,526

 

11,889,340

5,269,826

 

 

 

Total liabilities

12,542,923

6,527,347

 

 

 

Total equity and liabilities

39,418,678

26,222,861

Consolidated statement of comprehensive income 
For the year ended 31 December 2010
(in thousands of Russian Roubles)

 

2010

2009

 

 

 

Revenue

29,686,636

24,095,393

Cost of sales

(16,700,838)

(12,367,935)

Gross profit

12,985,798

11,727,458

 

 

 

Selling and distribution costs

(2,916,202)

(2,463,128)

General and administrative expenses

(891,954)

(711,245)

Other income

188,025

505,860

Other expenses

(488,852)

(400,603)

Financial income

315,167

132,878

Financial expense

(47,680)

(145,969)

Profit before income tax

9,144,302

8,645,251

 

 

 

Income tax expense

(1,980,506)

(1,792,810)

Profit for the year

7,163,796

6,852,441

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

Exchange differences on translation of foreign operations

(245)

-

 

 

 

 

 

 

Other comprehensive income for the year, net of tax

(245)

-

Total comprehensive income for the year, net of tax

7,163,551

6,852,441

 

 

 

Profit for the year

Attributable to:

 

 

Equity holders of the Parent

7,149,543

6,836,430

Non-controlling interest

14,253

16,011

 

 

 

 

7,163,796

6,852,441

 

 

 

Total comprehensive income for the year, net of tax

Attributable to:

 

 

Equity holders of the Parent

7,149,298

6,836,430

Non-controlling interest

14,253

16,011

 

7,163,551

6,852,441

1Q 2011 Sales of products

According to a non-audited report, Pharmstandard’s sales in 1Q2011 grew by 103.8% and totalled RUR 11,670.2 million which represents an increase of RUR 5,943.1 million in relation to RUR 5,727.1 million in 1Q2010.

The shares of pharmaceutical products and medical equipment in the Company’s overall sales equalled 99.1% and 0.93% respectively.

Pharmaceutical products

In 1Q 2011, sales of pharmaceutical products grew by 105.2% and reached RUR 11,563.6 million in comparison to RUR 5,635.8 million in 1Q 2010. The total increase amounted to RUR5,927.8 million.

In the total sales structure, 46.3% represented sales of the pharmaceuticals produced by the Company, and 51.4% represented TPP sales.

In 1Q 2011 the sales results include proceeds from the new subsidiaryPJSC Biolek (Ukraine). Pharmstandardholds55% of ordinary voting shares of Biolek. Sales of PJSC Biolek amounted to RUR 85.1 million or 0.7% of the overall volume of pharmaceutical products.

Sales of Company’s own pharmaceutical products, including the results of PJSC Biolek, increased by 21.8% or RUR 996.4 million and totalled RUR 5,560.4 million.

The shares of the OTC and Rx preparations in the structure of sales of Pharmstandard’s own products amounted to 79.3% and 16.0%, respectively.

Sales of Pharmstandard’s own OTC products increased by 20.4% or RUR 762.5 million and totalled RUR 4,494.1 million. Arbidol®,Pentalgin®, Complivit®,Afobazol®, Flucostat® were the top-selling brands.

Sales of prescription drugs (Rx) manufactured by Pharmstandard grew by 11.1% (RUR 91.0 million) and totalled RUR 908.2 million. Phosphogliv®, Rastan®, Combilipen®, Biosulin® andAzitrox® were the top-selling brands.

TPP sales grew by 460.1% or RUR 4,931.3 and reached RUR 6,003.2 million.

Mabthera® (H.Hoffman-La Rosche Ltd), Pulmozyme(H.Hoffman-La Rosche Ltd), Coagil® (CJSC Generium), Mildronate® (SC Grindex), Coagil (CJSCLekko), IRS® 19 and Imudon® (Solvay pharmaceuticals) were the top-selling brands.

Sales of medical equipment

The company's revenue from the sales of medical equipment in 1Q2011 grew by   RUR 15.3 million or 16.7% and amounted to RUR 106.6 million vs RUR 93.1 million in 1Q 2010.

Pharmstandard’s structure of sales, 1Q 2011

SALES  1Q 2011

 1Q 2011 (mlnroubles)

% of total sales

 1Q 2010(mln roubles)

% of total sales

Growth 1Q 2011/ 1Q 2010(mln roubles)

Growth  1Q 2011/ 1Q 2010 (%)

Pharmaceutical products

11 563,6

99,1%

5 635,8

98,4%

5 927,8

105,2%

PHS products

5 402,3

46,3%

4 548,8

79,4%

853,5

18,8%

OTC products

4 494,1

38,5%

3 731,6

65,2%

762,5

20,4%

Branded

3 938,1

33,7%

3 155,2

55,1%

782,9

24,8%

Non-branded

556,0

4,8%

576,4

10,1%

-20,4

-3,5%

Rx products

908,2

7,8%

817,2

14,3%

91,0

11,1%

Branded

816,1

7,0%

708,2

12,4%

107,8

15,2%

Non-branded

92,1

0,8%

109,0

1,9%

-16,8

-15,5%

TPP

6 003,2

51,4%

1 071,9

18,7%

4 931,3

460,1%

Mabthera

3 852,2

33,0%

0,0

0,0%

3 852,2

-

Pulmozyme

813,4

7,0%

244,1

4,3%

569,3

233,2%

Coagil

602,5

5,2%

213,9

3,7%

388,6

181,6%

Mildronate

263,4

2,3%

363,1

6,3%

-99,7

-27,5%

IRS 19, Imudon

257,8

2,2%

122,7

2,1%

135,1

110,2%

Other TPP

213,9

1,8%

128,1

2,2%

85,8

67,0%

Other sales

72,9

0,6%

15,1

0,3%

57,8

382,5%

PJSC Biolek(Ukraine)

85,1

0,7%

0,0

0,0%

85,1

-

Sales of medical equipment

106,6

0,9%

91,3

1,6%

15,3

16,7%

Total Pharmstandard sales

11 670,2

100,0%

5 727,1

100,0%

5 943,1

103,8%

Pharmstandard’s structure of sales (excluding TPP), 1Q 2011

SALES  1Q 2011 WITHOUT TPP

 1Q 2011 (mln roubles)

% of total sales

 1Q 2010(mln roubles)

% of total sales

Growth  1Q 2011/ 1Q 2010(mln roubles)

Growth  1Q 2011/ 1Q 2010 (%)

Pharmaceutical products

5 560,4

98,1%

4 563,9

98,0%

996,4

21,8%

PHSproducts

5 402,3

95,3%

4 548,8

97,7%

853,5

18,8%

OTC products

4 494,1

79,3%

3 731,6

80,2%

762,5

20,4%

Branded

3 938,1

69,5%

3 155,2

67,8%

782,9

24,8%

Non-branded

556,0

9,8%

576,4

12,4%

-20,4

-3,5%

Rx products

908,2

16,0%

817,2

17,6%

91,0

11,1%

Branded

816,1

14,4%

708,2

15,2%

107,8

15,2%

Non-branded

92,1

1,6%

109,0

2,3%

-16,8

-15,5%

Other sales

72,9

1,3%

15,1

0,3%

57,8

382,5%

PJSC Biolek(Ukraine)

85,1

0,7%

0,0

0,0%

85,1

-

Sales of medical equipment

106,6

1,9%

91,3

2,0%

15,3

16,7%

Total Pharmstandard sales

5 666,9

100,0%

4 655,2

100,0%

1 011,7

21,7%

Conference call:

Thursday, April 28, 2011

09:00 New York
14:00 London
17:00 Moscow

International Call-in Number:+44 (0)20 7162 0025 
US Call-in Number: +1 334 323 62 01

Conference call participants can register in advance using the link below:
https://eventreg1.conferencing.com/webportal3/reg.html?Acc=097741&Conf=178172

We recommend that participants start dialling in 5-10 minutes prior to ensure a timely start to the conference call.

Pharmstandard will be represented by:

Igor Krylov, CEO
Elena Arkhangelskaya, CFO
Ilya Krylov, IR

Conference call presentation will be available on Thursday, 28 April 2011 on Company’s web-site:

http://www.pharmstd.com/

The conference call replay will be available through May 6, 2011. 

 Replay UK Call-in Number: +44 (0) 20 7031 4064
Replay US Call-in Number: +1 954 334 0342
Replay Access Code: 894207

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


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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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