Moscow, 1 September, 2009 – JSC Pharmstandard (LSE: PHST LI, RTS: PHST RU) announces its unaudited 1H2009 IFRS results. Net profit of the Company for the first six months of 2009 amounted to RUR2,588, an increase of 47% over 1H2008.

Other financial highlights for 1H 2009 includes:

•         Revenue growth +62%; total revenue 10,062 mln RUR

•         Gross profit growth +31%; gross profit 4,775 mln RUR or 48% of sales

•         EBITDA[1] growth +51%; EBIDTA 3,952 mln RUR or 39% of sales

•         Net profit growth + 47%; net profit 2,588 mln RUR or 26% of sales

The following most essential events influenced the company’s business in 1H2009.

-         Pharmstandart won the government tender under 7 nosologies program (part of FRP) for oncology diseases treatment preparations. Pharmstandart acts as a distributor of Velcade® (bortezomib), original prescription product of Janssen-Cilag, and supplied Velcade® for the total amount of RUR2,505 mln;

-         Pharmstandart and ZAO “Apteki 36.6” signed an agreement on direct collaboration. Pharmstandart delivers its products directly to Pharmacy Chain 36.6.

-         In 1Н 2009, the management adopted a decision of reorganizing Group’s structure. This plan provides the reorganization of OJSC “Pharmstandart” in the form of joining OJSC “Pharmstandart - Octyabr” and CJSC “Masterlek”. OJSC “Pharmstandart - Octyabr” and CJSC “Masterlek” will be incorporated to OJSC “Pharmstandart”.

Below are forward-looking statements that involve risks and uncertainties. Pharmstandard actual results may differ materially from those discussed in such forward-looking statements due to various factors.

Operating Results

The table below summarizes operating results by comparing the key parameters as of June 30, 2008, and June 30, 2009, in absolute terms and as percentage in total.

Product classification as Rx and OTC products is subject to governmental regulation in Russia. The classification register is regularly reviewed.

It is noteworthy that changes in the portfolio structure do not influence sales results for pharmaceutical products.

Sales

Sales of pharmaceutical products, medical equipment and disposables are the company’s core line of business. Sales of pharmaceutical products accounted for 97.3%, and of medical equipment, for 2.7%, in total sales in 1H09. Pharmaceutical products and medical equipment are mostly sold under direct contracts with wholesalers and/or treatment facilities. Total sales stood at RUR 10,062 mln in absolute terms in 1H09, having increased by 62 % y-o-y (RUR 6,198 mln).

Sales of pharmaceutical products rose by 73% for the entire 1H09, which was largely due to the governmental tender for Velcade supply held in 2Q09. Participation in the tender positively influenced revenues but pulled down the key efficiency indicators for the company’s current business because margin for Velcade distribution is lower than that of core line of business. Below are provided the company’s financial indicators, excluding the impact of the Velcade tender.

Therefore, except for the Velcade impact, the Company shows a steady growth in total sales.

Pharmaceutical Products

OTC sales were up by RUR 1,408 mln, or 33%, from RUR 4,324 mln in 1H08 to RUR 5,732 mln in 1H09, which largely resulted from the active promotion strategy. The actively promoted products, such as Arbidol, Pentalgin, Complivit and Codelac, are still the greatest contributors to the growth. For instance, Arbidol sales increased by RUR 454 mln, or 44%, over 1H08 y-o-y. As mentioned above, significant growth in 1H09 was achieved for Pentalgin (RUR 255 mln), Complivit (RUR 144 mln) and Codelac (RUR 183 mln), or by 37%, 42% and 116%, respectively.

In 1H09, the Company began manufacturing and sales of two new strategic OTC drugs – Codelac Broncho and Magnelis В6 (in March 09 and April 09, respectively). The absolute sales came to RUR 7 mln for Codelac Broncho and to RUR 2 mln for Magnelis B6 in 1H09.

Rx sales increased by RUR 2,688 mln, or 203%, from RUR 1,327 mln in 1Н08 to RUR 4,015 mln in 1Н09. As mentioned above, this growth was largely due by Velcade contribution. As this product was supplied under a governmental tender, Rx sales results are considered exclusive of Velcade. Therefore, without taking into account tender sales, the organic Rx sales increase (exclusive of Velcade) came to 31%, or RUR 410 mln, from RUR 1,327 mln in 1H08 to RUR 1,737 mln in 1H09. Such drugs as Combilipen (growth by RUR 88 mln), Azitrox (by RUR 46 mln), Picamilon (by RUR 43 mln), or by 37%, 7% and 174%, respectively, were the greatest contributors to organic growth in Rx sales in 1H09. It is noteworthy that Combilipen is a new own drug launched in 2008. Sales of the drugs that influenced growth in 2008 were also steadily rising: Phosphogliv (by RUR 20 mln, or 29%), Cyclodol (by RUR 19 mln, or 86%), and Bios ulin (by RUR 16 mln, or 119%).

Medical Equipment and Disposables

Sales of medical equipment and disposables confirmed the earlier forecasted reduction. Sales were down by 48%, to RUR 273 mln, in 1H09 vs. RUR 526 mln in 1H08. Such downward trends are largely due to contraction of the market for governmental purchases in the hospital industry by an average of 40% as a result of the global financial squeeze.

Cost of Sales

The cost of sales includes the costs of raw materials and goods for resale, overheads, direct labor costs, depreciation of fixed assets and amortization of intangible assets. The cost of sales advanced by RUR 2,740 mln, or by 108%, to RUR 5,287 mln in 1H09 vs RUR 2,548 mln in 2008. The organic cost increase (net of Velcade) came to 21.7%, or RUR 552.6 mln.

Raw materials and Goods for Resale (86%) is the greatest cost item in the cost structure. Costs for this item mounted by RUR 2,606 mln, or by 136%, to RUR 4,520 mln, in 1H09 vs RUR 1,915 mln in 1Н08. These changes were triggered by the scheduled increase in the scope of production of pharmaceutical products and purchase of Velcade. The organic growth is equal to 22%, or RUR 419 mln, in the cost structure in 1H09, net of Velcade; the costs for this item stood at 75% as equal to that of 1H08.

Depreciation of fixed assets and amortization of intangible assets amounted to RUR 333 mln (6% of cost of sales), having increased by RUR 39 mln, or by 13%, y-o-y. The growth was fuelled by introduction of new production facilities on Pharmstandart – Tomschimfarm OJSC and Pharmstandart – Ufavita OJSC in 1H09 and amortization of the Afobazol brand purchased in 2H08.

Generally, the cost of sales rose to 52.5% in sales in 1H09 vs 41.1% y-o-y, which is due to participation in the Velcade tender; the analysis of organic changes suggests that the cost of sales dropped from 41% in total sales in 1H08 to 40% in 1H09.

Gross Profit

Under the impact of the above factors, the Company’s gross profits grew by 1,124 mln, or 31% increase, from RUR 3,651 mln in 1H08 to RUR 4,775 mln in 1H09. However, in percentage terms, the share of gross profits in total sales was down from 59% in 1Н08 to 48% in 1Н09.

The key factor in the existing trends is the earlier mentioned tender supply of Velcade, because gross profits for distribution of this drug is 4%. Therefore, the organic growth in gross profits (net of Velcade) amounts to RUR 1,033 mln, or 28%, from RUR 3,651 mln in 1H08 to RUR 4,684 mln in 1H09. In percentage terms, this indicator accounted for 60% in total sales in 1H09 and for 59%, in 1H08.

Operating Costs

Operating costs dropped by RUR 26 mln, or 2%, from RUR 1,290 mln in 1H08 to RUR 1,264 mln in 1H09. In percentage terms, this indicator came from 21% in 1H08 to 13% in 1H09.

Selling and distribution (S&D) expenses shrank by RUR 21 mln (2%), to RUR 943 mln, in 1H09 vs RUR 964 mln in 1H08, accounting for 9.4% and 15.5% of sales of the appropriate periods.

Marketing expenses and advertising and promotion expenses (47% of S&D) were down by RUR 37 mln (2%) in 1H09. Labour costs (29% of S&D) rose by RUR 8 mln in 1H09 (by 3%) y-o-y, largely due staff increase by 114 employees in production facilities of Pharmstandart – Ufavita OJSC (ampoule production) and of Pharmstandart – Tomschimfarm OJSC (transfer to own production and scaling up production facilities for Arbidol tablets, Amixin tablets, etc.).

Other expenses (23.8% of S&D) grew by RUR 9.3 mln, or 4%, to RUR 224.9 mln in 1H09 vs RUR 215.7 mln y-o-y. The growth was largely due to increase in the cost of services in such items as Freight, Communication and Insurance of Goods in Transit (by RUR 10.0 mln, or 18%), Materials, Maintenance and Utilities (by RUR 12.1 mln, or 61%) and Depreciation (by RUR 7.8 mln, or 44%). It is also noteworthy that other expenses within S&D expenses decreased for such items as Trainings and Other Services (by RUR 17.4 mln, or 63%) and Travel and Entertainment (by RUR 7.1 mln, or 26%) in 1H09 y-o-y.

General and administrative costs (G&A) expenses dropped by RUR 6 mln, or by 2%, to RUR 321 mln, in 1H09 from RUR 327 mln in 1Н08.

Operating Profit

As a result of the above factors, operating profit soared by RUR 1,150 mln, or 49%, from RUR 2,360 mln in 1Н08 to RUR 3,510 mln in 1Н09, and accounted for 35% in total sales in 1H09 vs 38% y-o-y.

This profitability reduction is due to participation in the governmental tender (for Velcade). The organic trends point to the increase in operating profit by RUR 1,064 mln, or 45%, from RUR 2,360 mln in 1Н08 to RUR 3,424 mln in 1Н09. Operating profit accounted for 44% in sales in 1H09 vs 38% in 1H08.

Other expenses

In 2009, other expenses amounted to RUR 186 mln, or 2% of sales. Foreign exchange loss in 1H09 came to RUR 259 mln in comparison with foreign exchange gain of RUR 142 in 1H08. The share of operating expenses in total sales (1%) reduced due to the reinstatement of earlier created provisions of RUR 120 mln for ‘Genesis’ indebtedness.

Interest expense, net

Finance costs dropped by RUR 74 mln, or 60%, from RUR 124 mln in 1H08 to RUR 50 mln in 1H09. The breakdown of this parameter is shown in the company’s financial statements for 1H09.

Income Tax Expense

The statutory profit tax in Russia was fixed at 24% in 2008 and at 20% since January 1, 2009. The Company incurred tax expenses of RUR 687 mln, (7% in total sales) in 1H09 versus RUR 610 mln  (10% in total sales) in 1H08. Reduction in effective tax rate and increase in tax expenses by 13% (RUR 77 mln) in the context of a 62% total sales increase is explained by change in the statutory profit tax that stood at 24% in 2008 and was replaced with 20% effective from January 1, 2009.

Profit for the Year

The company’s net profit for the 6 months ended 30 June 2009 rose by RUR 831 mln, or 47%, to RUR 2,588 mln in 1H09 vs RUR 1,757 mln in 1H08, which amounted to 26% and 28%, respectively, as percentage of sales. The profit attributable to the parent of the company stood at RUR 2.584 mln in 1H09. The organic profit for 1H 2009 is 32%.

Conference Call

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

Tuesday, September 1, 2009

09:00 New York

14:00 London

17:00 Moscow

To join the conference call please register on-line:

https://eventreg1.conferencing.com/webportal3/reg.html?Acc=916302&Conf=168022

or dial:

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

US Call-in 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.

Pharmstandard will be represented by:

Igor Krylov, CEO

Elena Arkhangelskaya, CFO

Anton Golubok, IR

Conference call presentation will be available on Tuesday, 1 September 2009 on Company’s web-site: http://www.pharmstd.ru/investors_en/investor/p2/

The conference call replay will be available through September 6, 2009.

International Replay Number: +44 (0) 20 7031 4064

US Toll Replay Number : +1 954 334 0342

Replay Access Code: 844033

Contacts:

JSC Pharmstandard

Anton Golubok

Tel: +7 495 970 0030 ext 2029

E-mail: ir@pharmstd.ru

www.pharmstd.ru

***

Pharmstandard is the leading Russian pharmaceutical company. According to Pharmexpert Marketing Research Centre, it holds the top position in the domestic pharmaceutical market retail segment and the leading position among Russian pharmaceutical companies overall. Pharmstandard is the only Russian company among the top ten Russian pharmaceutical market operators.

Pharmstandard portfolio includes over 200 products used in the treatment of diabetes, growth hormone deficiency, cardiovascular diseases, gastroenterological and neurological disorders, infectious diseases, cancer, etc. Over 90 products offered by Pharmstandard are included in the List of Vital Pharmaceutical Products.

Pharmstandard products are well known to Russian consumers. Among our market-leading brands are Arbidol ®, Complivit®, Pentalgin®, Flucostat®, Codelac®, Phosphogliv®, Amiksin® and Afobazol®. Arbidol® is the leading brand on the Russian pharmaceutical market. Its antiviral action has been studied in international research centers. Pentalgin® has been granted “BRAND #1 IN RUSSIA” award for 2008 in analgesics category. Afobazol® - new original selective anxiolytic for anxiety disorders treatment.

Pharmstandard have agreements with Grindex, Latvia on exclusive distribution and promotion of Mildronate® (cardio-vascular) and with Solvay Pharmaceuticals, France on production of IRS19® and Imudon® (immunomodulating).

In 2004–2009, we developed and introduced around 40 new pharmaceutical products. Our business priorities lie in the development of new product lines comprising genetically engineered medicines, vitamin and mineral complexes, cold relief preparations and medicines used in the treatment of cardiovascular, gastroenterological, neurological disorders and endocrinopathies. Currently, the Company is working on the development of new high-tech formulations in close cooperation with the leading Russian research centres.

Pharmstandard operates four pharmaceutical manufacturing facilities in Kursk, Ufa, Tomsk and Nizhny Novgorod and, with a production capacity of 1.3 billion packs per year. Six production lines of JSC «Pharmstandard-Leksredstva» meet GMP requirements. JSC «Pharmstandard-Leksredstva» is the first Russian pharmaceutical plant included in EudraGMP database. All plants meet Russian legislative requirements.

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.

The Company has invested approximately RUR 3 billion in capital investments in its manufacturing facilities since 2004. Pharmstandard placed its shares on Russian Trading System (RTS) and GDRs on London Stock Exchange (LSE) during IPO in May 4, 2007. The current GDR to ordinary share ratio is 1:4. Augment Investments Limited controls 54.3% of share capital. Free float represents 45.7% of share capital (LSE – 27.6%, RTS – 18.1%).

www.pharmstd.ru

This press release does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of JSC Pharmstandard (the “Company”) or any of its subsidiaries in any jurisdiction or an inducement to enter into investment activity. No part of this press release, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever.

[1] excluding foreign exchange gain or loss