Moscow, 10 February, 2012 – Pharmstandard JSC (LSE: PHST IL, MICEX\RTS (main):PHST, MICEX\RTS (classica): PHST ) announces unaudited consolidated sales results according to IFRS for 2011.

  

2011 Key Highlights

· In 2011 Pharmstandard's sales enjoyed a steady growth increasing by 43.7%, or RUR 12,968.9 million, and amounted to RUR 42,655.5 million vs. RUR 29,686.6 million in 2010.[1]

· As in the previous year, Arbidol® remains the best performing brand on pharmaceutical market in Russia.[2] Sales of Arbidol® in 2011 amounted to RUR 4,011 million, a reduction of 28.2% or RUR 1,579 million vs. RUR 5,589 million in 2010. A reduction in consumption of Antiviral and immunomodulatory products was a common feature for all the players of the pharmaceutical market in Russia, without exception. It is worth mentioning that the Arbidol® CAGR shown more than 30% (2005-2011).

Simulation of Company's organic sales[3] excluding Arbidol® indicates that the Company's revenue from sales of pharmaceutical products in 2011 would have been RUR 15,613.4 representing an increase of 15% (RUR 2,044.5 million) in relation to the previous year (RUR 13,572.9 million). Organic sales[4] of Company's products including Arbidol® sales amounted to RUR 19,624.2 million, an increase of 2.4% (RUR 461.9 million).

· Revenue from sales of Vital and Essential Products amounted to RUR 24,190.5 million or 57.4% of the total revenue of the Company in 2011. 

· Sales of Third Party Products (TPP) in 2011 increased by 119.6% or RUR 11,832.1 million totalling RUR 21,726.0 million. The share of TPP in overall 2011 sales was 51.6% (33.3% in 2010). The Company supplied 23,532 thousand packs of TPP; in 2011, the increase in volume terms amounted to 116.1% or 12,664.1 thousand packs vs. the 2010 figures (10,887.9 packs).

· Revenue of Phramstandard-Biolek PJSC in 2011 totalled RUR 543,4 million. The Company's Management views this as a positive development, in line with the expectations regarding performance of the company one year after the announcement about the purchase of 55% of Biolek PJSC (Ukraine) shares in January 2011.

· Sales of medical equipment in 2011 amounted to RUR 763.6 million, a considerable increase (21% or RUR 133.1 million) vs. the same period a year ago. The overall increase in the segment of medical equipment resulted primarily from the expansion of the line of products sold through Pharmstandard-Medtechnika LLC, a joint venture set up for sales of medical equipment.

The Pharmaceutical Market in Russia. Results of 2011.

· In 2011 Pharmstandard was in the third position among the TOP10 pharmaceutical corporation in Russia[5].

· Pharmstandard came 27 in the TOP-100 of the most dynamic consumer goods companies, according to the rating of the Kommersant Secret Firmi Magazine. 178 consumer goods companies participated in the survey; each of them has been in business for at least three years and is one of the five leading companies in its market.[6]

· The value of the Russian pharmaceutical retail sector in 2011 was RUR 462,3 million, an increase of 14.2% or RUR 57.5 million vs. the 2010 figures. The volume of the retail sector in 2011 amounted to 4,53 billion packs, representing an increase of 3% vs. the 2010 figures (4,39 billion packs). It is worth noting that this growth rate is significantly lower than that for 2010/2009 (+11%). Apart from that, the total growth in volume terms for 2011/2010 (+137 million packs) is three times lower than the growth figures for 2010/2009.[7]

· In 2011, the Rx segment grew by 18% in value terms and by 8% in volume terms in relation to the figures for the previous year.
OTC segment increased by 11% in value terms and by 1% in volume terms.


For this reason, it is possible to say that the Rx segment was the growth driver in 2011 (60% of the growth structure in value terms vs. 50% in 2010). The share of the Rx products in value terms amounted to 50% (in 2010 it was 48%). [8]

· Our analysis of the Pharmexpert database shows that the Vital and Essential Products segment of the Russian pharmaceutical market in 2011 increased by 12%, a more significant growth in comparison to 2% in 2010/2009. The growth in volume terms in the period from 2011 to 2010 was 7 times higher in relation to the corresponding figures for the period from 2010 to 2009.

In 2011, the share of the Vital and Essential Products segment was 35% in value terms and 39% in volume terms. Apart from that, the Vital and Essential Products segment enjoyed a much higher rate of growth in comparison with the products not included in the list of Vital and Essential Products, namely +7% vs. +1%. This leads us to the conclusion that the Vital and Essential Products segment is becoming the driver of growth in volume terms: 85% of the growth structure (+114 million packs of the total number of 137 million packs); while in 2010/2009 the share of Vital and Essential Products in the growth structure amounted to no more than 38%.

Rx products are the growth drivers within the Vital and Essential Products segment; their increase in 2011 vs. 2010 amounted to 14% in value terms and 10% in volume terms.

Pharmstandard's sales results in 2011.[9]  

According to the non-audited results (IFRS), the Company's revenue in 2011 grew by 41.9% and amounted to RUR 42,113.8 million, an increase of RUR 12,427.2 million vs. RUR 29,686.6 million a year earlier. The share of sales of pharmaceutical products in the Company's overall revenue amounted to 98.2%. In the overall sales structure, organic sales comprise 45.7%, Third Party Products (TPP) account for 51.6% and other products for 0.9%. Pharmstandard's revenue from sales of medical equipment amounted to 1.8% of Company's total sales.

· Sales of pharmaceutical products (including Third Party Products) amounted to 42.3% or RUR 12,294.1 million; total sales amounted to RUR 41,350.2 million.

· Organic sales (excluding TPP) amounted to 2.4% or RUR 461.9 million; total sales amounted to RUR 19,624.2 million.

Slowing down of the rate of organic sales has been caused primarily by lower sales of Arbidol® due to the stable epidemiological situation during 2011 which lead to a reduced consumption of Antiviral and immunomodulatory products. This was a tendency common for all participants of the Russian pharmaceutical market, without exception. 

It is worth mentioning that a simulation of Company's sales excluding Arbidol® indicates that the Company's organic revenue from sales of pharmaceutical products in 2011 would have been RUR 15,613.4 representing an increase of 15% (RUR 2,044.5 million) in relation to the previous year (RUR 13,572.9 million).

· Sales increase of Third Party Products amounted to 119.6% or RUR 11,832.1 million. Their total sales amounted to RUR 21,726 million.

Rx products (Company's organic sales of [10])

In 2011, Pharmstandard enjoyed great sales results in the segment of Rx products which have won trust of the inhabitants of Russia due to their outstanding quality. Revenue from sales of Rx products amounted to RUR 3,798.2 million and increased by RUR 504 million or 15.3% vs. RUR 3,294.2 million in 2010.

OTC products (Company's organic sales[11])

In 2011, the Company's revenue from sales of OTC products amounted to RUR 15,438.6 million; the deviation from the figures for 2010 was to RUR -142.5 million or -0.9%.

Sales of Arbidol® in 2011 amounted to RUR 4,011 million, a reduction of 28.2% or RUR 1,579 million vs. RUR 5,589 million a year earlier.

This change in sales of this product is caused by the reduction in orders, which manufacturers of pharmaceutical products receive from distributors, due to the stable epidemiological situation in Russia, according to Rospotrebnadzor (Federal Service on Customers' Rights, Protections and Human Well-Being Surveillance), and also due to the stockpiles of such products in distributors' warehouses sufficient for maintenance of the current level of consumption.

Except this deviation in Arbidol® sales figures, other OTC Pharmstandard products enjoyed steady growth both and volume and in value terms.

A simulation of OTC portfolio sales excluding Arbidol® shows that the Company's revenue from OTC products in 2011 would have amounted to RUR 11,427.8 million representing an increase of 14.4.% or RUR 1,436.1 million vs. the same period the previous year.

Sales of pharmaceutical products Pentalgin® and Codelac® Broncho without codeine 

In 2011, revenue from sales of products without codeine amounted to RUR 642.9 million representing an increase of 320% or RUR 489.8 million vs. sales of products without codeine in 2010 (RUR 153 million).

Sales of Pentalgin® (without codeine) amounted to RUR 520.8 million or 21.9% of the whole Pentalgin® product line in 2011 (RUR 2,374.9 million). An increase in Pentalgin® (without codeine) sales amounted to 636% or RUR 450.1 million vs. RUR 70.7 million a year earlier.

Sales of Codelac® Broncho (without codeine) amounted to RUR 122.0 million or 14.4% of the whole Codelac® product line in 2011 (RUR 872.2 million). An increase of Codelac® Broncho (without codeine) amounted to 48.2% or RUR 39.7 million vs. RUR 82.7 million a year earlier.



Decree of the Government of the Russian Federation No. 599 dated 20 July 2011 stipulates that from 1 June 2012 pharmaceutical products containing a small amount of codeine will only be sold with a doctor's prescription.

It is worth noting that, since 2008, Pharmstandard has been developing products, such as Pentalgin® and Codelac® Broncho without codeine, which are used as analgesics and for the treatment of ARVI symptoms and are sold without a doctor's prescription.



Vital and Essential Products 

Revenue from sales of the pharmaceutical products which are included in the list of Vital and Essential Products, has increased in comparison with the figures representing 2010 by RUR 7,450.3 million or 44.5% and totalled RUR 24,190.5 million accounting for 57.4% of total Pharmstandard revenue in 2011.

Export sales

In 2011, export of Pharmstandard's pharmaceutical products grew by 25% to RUR 741.9 in comparison to RUR 593.3 million in 2010. The share of the TOP-10 export products accounts for about 79% of the total export revenue of the Company. The TOP-10 export products include: Arbidol®, Complivit®, Cocarboxylase hydrochlorid, Pentalgin®, Afobazol®, Sulphacamphocaine, Citramon P, Ingalipt®, Activated charcoal, Phosphogliv®.

The Company exports its products to 14 countries. They are mainly CIS and former Soviet Union countries: Ukraine 41.3%, Uzbekistan 35.4%, Belarus 7.4%. In the overall sales structure of the Company, the share of its pharmaceutical products export amounted to 1.8%.

The Company's strategic plans include active development and expansion of its export in Ukraine, in Latin American countries (Venezuela, Argentina, Nicaragua), in African countries (Nigeria, Egypt) and in the Middle East (Iran, Iraq, Afghanistan, UAE).

Third Party Products (TPP)

Sales of TPP increased by 119.6% or RUR 11,832.1 million and totalled RUR 21,726 million. The share of TPP sales in overall sales for 2011 amounted to 51.6% (in 2010 it was 33.3%). The following products were the main drivers of the increase in sales: Mabtera® (RUR 8,239.3 million), Velcade® (RUR 3,596.4 million), Coagil VII (RUR 1,707.3 million), Pulmozyme® (RUR 1,612.1 million), IRS®-19 and Imudon® (RUR 1,312.6 million), Prezista® (RUR 1,243.6 million), Mildronate® (RUR 1,071 million).

Sales of TPP in 4Q2011 amounted to RUR 9,986.6 million, an increase by 165% or RUR 6,212.9 million. The share of TPP in 4Q2011 represented 45.9% of overall sales for the year. This increase was due to TPP sales which took place in December 2011 within the framework of the 7 nosologies program following the state auctions in October.

In 4Q2011 the Ministry of Health and Social Development (Minzdravsotsrazvitiya) conducted open auctions for procurement of pharmaceutical products according to the 7 nosologies program, in order to provide for the supply of required pharmaceutical products for 2012 for the amount of RUR 21 billion (including VAT). Pharmstandard won auctions for the procurement of products worth RUR 6,853.8 (including VAT). All the pharmaceutical products were procured in time; the allocated amounts from the budget have been paid.

In 2011, Swiss company Roche and Pharmstandard group of companies successfully localized production of Mabthera® (rituximab) in the territory of the Russian Federation. This partnership resulted in the successful transfer of the final stage of production of this original biotechnological product to the modern plant at Pharmstandard-UfaVita OJSC.

In 2011 Johnson & Johnson LLC, its pharmaceutical products branch Janssen and OJSC Pharmstandard-UfaVita (the city of Ufa; the plant is a part of Pharmstandard group of companies) signed a Memorandum of Intent outlining the main areas of cooperation in localization of the full cycle of production of Velcade® (bortezomib), a pharmaceutical product included in the list of Vital and Essential Products by a Government Decree in July 2010.

This cooperation will result in establishing the first production facility in Russia specialising in production of cytostatic pharmaceutical products in compliance with the European GMP (Good Manufacturing Practice) standards.

Medical Equipment  

Sales of medical equipment in 2011 amounted to RUR 763.6 million, a significant increase of 21.1% or RUR 133.1 million vs. the same period a year earlier (RUR 630.5 million).

The overall growth in the segment of medical equipment is attributable primarily to the expansion of the line of products sold through Pharmstandard-Medtechnika LLC, a joint venture set up for sales of medical equipment. On 5 July, 2011, OJSC Pharmstandard and DGM Group of Companies announced the creation of Pharmstandard-Medtechnika LLC. To increase sales of disinfecting and sterilizing medical equipment, Pharmstandard management decided to establish, together with DGM Group of Companies, a new legal entity, Pharmstandard-Medtechnika LLC (Russia). OJSC Pharmstandard and DGM Trading Limited established Moldildo Trading Limited, a joint venture which is the sole owner of Pharmstandard-Medtechnika. OJSC Pharmstandard's share in the project is 75%, DGM's share is 25%.

Sales of PJSC Pharmstandard-Biolek (Ukraine) in 2011

Revenue of PJSC Pharmstandard-Biolek in 2011 amounted to RUR 541.7 million.

Structure of revenue of OJSC Pharmstandard in 2011

Organic revenue structure of OJSC Pharmstandard in 2011 (excluding Third Party Products) 

 

Notice of 2011 sales results announcement date
 
Moscow, 10 February, 2012 – OJSC Pharmstandard (Pharmstandard JSC (LSE: PHST IL, MICEX\RTS (main):PHST, MICEX\RTS (classica):PHST) will be announcing its 2011 sales results on 

Friday, 10 February 2012 at 17:00 PM Moscow time.

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.

Friday, February 10, 2012
08:00 New York
13:00 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=513832&Conf=182407

or dial:

International Call-in Number: +44 (0)20 7162 0025
US Toll Number: +1 334 323 6201
Conference ID: 911622 

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

Conference call presentation and press release will be available on Friday, 10 February 2012 
on Company’s web-site: http://pharmstd.com/

Pharmstandard will be represented by:

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

The conference call replay will be available through February 22, 2012.
International Replay Number: +44 (0)20 7031 4064
US Toll Replay Number: +1 954 334 0342

Replay Access Code: 911622

Contacts:

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