11 April 2007, Moscow: JSC Pharmstandard (“Pharmstandard” or the “Company”), a leading domestic pharmaceutical company in Russia, today confirmed its intention to launch an initial offering of its shares (the “Offering”). The Company expects that existing shares will be offered by the Company's principal shareholder in the form of global depositary receipts (“GDRs”) and ordinary shares by the end of June 2007. The Company's shares are currently listed on the Russian Trading System (RTS) and the Company further intends to seek a listing of the shares on the Moscow Interbank Currency Exchange (MICEX), and the GDRs on the London Stock Exchange.
The Company has appointed Citigroup and UBS Investment Bank as Joint Global Coordinators and Bookrunners of the proposed Offering.
Commenting on today’s announcement, Igor Krylov, General Director of Pharmstandard said:
“In the last three years Pharmstandard has grown considerably both through acquisitions and organically. We are now the leading domestic player in the Russian pharmaceutical market, one of the fastest growing in the world. Our goal is to strengthen further our position as the leading domestic pharmaceutical company in Russia and become one of the top 3 pharmaceutical companies operating in Russia overall, by executing our strategy of promoting our market leading brands, launching new products, increasing investment in sales and marketing and selectively acquiring additional companies.
We also aim to achieve margin improvement through realising synergies from our recent acquisition of Masterlek as well as focusing on promoting our market leading brands. This strategy, which is being executed by an internationally experienced management team, leaves us well positioned to become the first Russian pharmaceutical company to access the international equity capital markets.”
2006 Results Highlights
Pharmstandard also announced today the highlights of its results for the year ended 31 December 2006.
In 2006, the Company achieved sales of RUR 8,523 million (US$ 323.7[1] million), 50% higher than in 2005. The Company’s increased revenues were due to higher sales of over-the-counter products which were 55% higher at RUR 6,032 million (US$ 229.1 million), and branded prescription products, which rose 63% to RUR 1,199 million (US$ 45.5 million). Growth resulted from both the first time consolidation of the results of the operations of Masterlek, which was acquired in August 2006 and contributed revenue of RUR 1,441 million (US$ 54.7 million), as well as organic growth of Pharmstandard’s existing products. The promoted brands that made the largest contribution to sales in 2006 were Arbidol®, Pentalgin® and Terpincod®. The remainder of Pharmstandard’s 2006 sales came from medical equipment and disposables which increased 18% to RUR 1,196 million (US$ 45.4 million).
The increase in Pharmstandard’s sales enabled the Company to increase gross profits in 2006 by 55% to RUR 4,938.5 million (US$ 187.6 million). The gross margin improved from 56% in 2005 to 58% in 2006.
In 2006, Pharmstandard’s profits attributable to shareholders increased by 109% to RUR 1,895.3 million (US$ 72 million). This figure was after income taxes of RUR 663.3 million (US$ 25.2 million) and minority interests of RUR 138.4 million (US$ 5.3 million).
Notes to Editors:
Overview of Pharmstandard
Pharmstandard is the leading domestic pharmaceutical company in Russia and the fourth largest pharmaceutical company operating in Russia overall, by sales value. The Company develops, manufactures, markets and sells generic and, to a lesser extent, original pharmaceutical products in various formulations, primarily in Russia. Pharmstandard’s product portfolio includes market-leading brands, such as Arbidol® (antiviral for systemic use),Pentalgin® (analgesics), Terpincod® (cough and cold), Complivit® (vitamins) and Flucostat® (antifungal). In 2006, Arbidol® was the largest selling pharmaceutical product, by sales, in the commercial segment of the Russian pharmaceutical market, according to preliminary data by Pharmexpert. Pharmstandard has limited exposure to the Russian Government’s Federal Reimbursement Programme, through which 8% of its pharmaceutical product sales were made in 2006.
Pharmstandard’s pharmaceutical product portfolio includes products that do not require a medical prescription, as well as prescription products. The pharmaceutical product portfolio covers a wide range of therapeutic segments. Sales of products within the Company’s five core therapeutic segments, namely analgesics, cough and cold, vitamins, antivirals for systemic use and antifungals, accounted for 72% of its pharmaceutical product sales in 2006. Pharmstandard’s pharmaceutical product portfolio consists of both branded generics, which may be trademarked and which it promotes through its direct sales force, and non-branded, or “pure”, generics, which are older products that have demonstrated sustainable demand from consumers without the need for continued active promotion.
In August 2006, the Company acquired Masterlek, a Russian pharmaceutical company focused on the antiviral for systemic use and antifungal therapeutic segments. This acquisition was in line with Pharmstandard’s corporate strategy to expand its market position in Russia through acquisitions that complement the Company’s product portfolio. Masterlek has contributed approximately 30 products to the Company’s product portfolio, including the market-leading brands Arbidol® and Flucostat®.
Pharmstandard operates five manufacturing facilities in Russia and, with a production capacity of 1,070 million packs as of December 31, 2006, it has one of the largest production capacities among domestic pharmaceutical companies in Russia. The Company has invested approximately RUR1.6 billion in capital investments in its manufacturing facilities since the start of 2004. Pharmstandard’s flexible production capacity distinguishes it from its competitors by allowing it quickly and efficiently to adjust production based on input from its distributors and sales force.
In addition to its pharmaceutical business, the Company also develops, manufactures, markets and sells medical equipment, such as sterilizing and distilling machines, and disposable medical products, such as syringes.
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