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Pharmstandard OJSC reports its H1/Q2 2014 sales results

14.08.2014

Moscow, August 14, 2014 – Pharmstandard OJSC (LSE: PHST IL, RTS: PHST RU) (further “Pharmstandard” or the “Company”) announces its unaudited Q2/H1 2014 sales results.

On April 1, 2014 OTCPharm PJSC (further “OTCPharm”), OTC business that was spun-off from Pharmstandard OJSC, started independent operating activities.

As of Q2 2014 OTCPharm sales are no longer included into Pharmstandard sales and will be recognized in OTCPharm statements.

Sales highlights.

H1 2014 Pharmstandard sales reached RUR17 224m demonstrating RUR321m or +2% y/y growth, compared to RUR16 903m in H1 2013
Pharmaceutical products and medical equipment accounted for 71.7% and 1.6%. of the Company’s total sales in H1 2014, respectively. 5.8% of total sales is attributed to Services to third parties including agency fees and contract manufacturing (further “CMO”). 20.9% of total sales is attributed to sale of finished goods and raw materials to OTCPharm in April 2014 as a result of the spin-off
In Q2 2014 Pharmstandard sales reached RUR9 264m growing by RUR1 750m or +23% y/y, compared to RUR7,514m in Q2 2013

H1 2013 key highlights and developments

Acquisition of a 20% stake in Biocad Holding Ltd. On May 21, 2014 OJSC Pharmstandard and Millhouse LLC announced plans to acquire stakes (individually) in Biocad Holding Ltd., the main shareholder in Russian biotechnological company CJSC Biocad (“Biocad”). Biocad specializes in the development, production and promotion of original and generic drugs in the following therapeutic categories: urology, gynecology, dermatovenerology, oncology, hematology, autoimmune and infectious diseases.

The deal was finalized on July, 24. Under the terms of the deal, Pharmstandard acquired 20% of Biocad Holding, while a Millhouse-affiliated entity will purchased a further 50% stake.

Pharmaceutical products. Sales results.

Pharmaceutical sales in H1 2014 decreased by RUR3 628 million (-23%) up to RUR12 342m vs RUR15 970m in H1 2013, with organic sales accounting for 54%, TPP for 42% and API for 4% in the pharmaceutical sales mix. The decrease is mainly attributed OTC products (-45.2%) with majority of them being moved to OTCPharm and TPP products (-11.9%)

Organic pharmaceutical sales in H1 2014 amounted to RUR6 674m (-30%) vs RUR9 558m in H1 2013. The structure of sales changed as a result of the spin-off with 54% accounted for by OTC products and 46% by Rx products.

Organic prescription product (Rx) sales in H1 2014 grew by RUR115m (+4%) to reach RUR3 037m. Key growth drivers were Phosphoglive®, Combilipen® and Octolipen®.

Organic over-the-counter (خزر) product sales in H1 2014 went down to RUR3 637m (-45.2%) with the majority of OTC products being moved to OTCPharm – a company spun-off from Pharmstandard which started its’ independent operating activities on of April 1, 2014.

Spin-off effect. In April 2014, to launch operating activities of OTCPharm, all finished goods of OTC products and raw materials for manufacturing of these products were sold to OTCPharm by the Group at the amount of RUR3 596m.

Services to third parties. The Company provides services to third parties which were reclassified to regular revenue in 2014. These services include contract manufacturing and agency contracts with OTCPharm.

Contact Manufacturing. The Company’s subsidiaries provide services for the manufacturing of certain products from the raw materials owned by customers. Since 2014, the management of the Group is classified contractual manufacturing as a regular revenue. Thereof, Pharmstandard reclassified income from contractual manufacturing accounted previously on net basis from other income to revenue.

Agency Fees. The Company holds agency contracts with related parties for distribution and sales of certain products. Since 2014, the management of the Group classified agency fee income as a regular revenue. Thereof, Pharmstandard reclassified agency fee income from other income to revenue and for the purpose of comparative analysis, the prior year figures were restated accordingly.

TPP sales in H1 2014 went down to RUR5 202m (-12%) (vs RUR5 902 million in H1 2013).

Government procurement. 7 Nosologies Federal Program.

Government procurement segment demonstrated 18% growth in H1 2014 bringing back Velcade to the list.

H1 2014 sales reached RUR2 399m vs RUR2 035m in H1 2013.

Coagil® and Infibeta declined for the total sum of RUR367m due to relocation of auction timing.

For H2 2014 the auctions are announced for Velcade®, Mabthera®, Pulmozyme® and Rastan®.

Brand	Category	H1 2014		H1 2013		Change
Brand	Category	Sales, RURm	% of TPP sales	Sales, RURm	% of TPP sales	RURm	%
Mabthera®	Rx	588	11%	536	9%	52	10%
Revlimid	Rx	428	8%	415	7%	13	3%
Presista®	Rx	419	8%	233	4%	186	80%
Velcade®	Rx	280	5%	0	-	280	-
Coagil	Rx	248	5%	414	7%	-166	-40%
Infibeta	Rx	23	0.0004%	202	3%	-201	-100%
*Other TPPs*	Rx	*436*	8%	*235*	4%	*204*	*46%*
Total for the group	Rx	2 399	46%	2 035	34%	364	18%
Total TPPs	Rx	5 202	100%	5 902	100%	-700	-12%

Commercial segment

Commercial TPP sales in H1 2014 declined to RUR2 803m (-28%) primarily driven by Reduksin® sales which fell RUR937m (-65%) causing a significant effect on TPP segment overall.

Brand	Category	H1 2014		H1 2013		Change
Brand	Category	Sales, RURm	% of TPP sales	Sales, RURm	% of TPP sales	RURm	%
IRS-19®, Imudon®	Rx	763	15%	516	9%	247	48%
Reduxin®	OTC, Rx	508	24%	1 445	24%	-937	-65%
Mildronate®	OTC	455	9%	420	7%	36	9%
Emoksipine	Rx	171	3%	124	2%	47	38%
*Other TPPs*	OTC, Rx	*906*	17%	1 362	23%	-*456*	-34%
Total for the group	OTC, Rx	2 803	54%	3 867	66%	-1 064	-28%
Total TPPs	OTC, Rx	5 202	100%	5 902	100%	-700	-12%

Decline in Reduxin® sales is a result of regulatory changes. The Company cannot make plans to receive revenue from Reduxin sales further on.

Other TPPs declined -34% (-RUR456m) driven by completion of sales under single procurement contracts concluded in year 2011.

H1 2014 medical equipment sales reached RUR284m (-39%).

H1/Q2 2014 Sales structure.

H1 2014 SALES	H1 2014 (RURm)	% of total sales	H1 2013 (RURm)	% of total sales	y/y growth (RURm)	y/y growth (%)
Pharmstandard Group total sales	*17 224*	*100%*	*16 903*	*100%*	*321*	2%
Pharmaceutical products	12 342	72%	15 970	95%	-3 628	-23%
Organic pharmaceutical sales	6 674	39%	9 558	56%	-2 884	-30%
Rx	*3 037*	*18%*	*2 922*	*17%*	*115*	4%
Branded	2 682	16%	2 524	15%	158	6%
Non-branded	356	2%	399	2%	-43	-11%
*OTC*	*3 637*	*21%*	*6 635*	*40%*	*-2 998*	*-45%*
TPP	5 202	30%	5 902	35%	-700	-12%
Government procurement	2 399	14%	2 035	12%	364	18%
Commercial	2 803	16%	3 867	23%	-1 064	-28%
Other sales – substances	466	3%	511	3%	-45	-9%
Medical equipment	284	2%	464	3%	-180	-39%
Services to third parties (incl. CMO and agency fees)	1 002	6%	468	3%	534	114%
Sale of finished goods and raw materials to OTCPharm (spin-off effect)	*3 596*	*21%*	-	-	*3 596*	*100%*

Q2 2014 SALES	Q2 2014 (RURm)	% of total sales	Q2 2013 (RURm)	% of total sales	y/y growth (RURm)	y/y growth (%)
Pharmstandard Group total sales	*9 264*	*100%*	*7 514*	*100%*	*1 750*	*23%*
Pharmaceutical products	4 972	54%	7 107	95%	-2 135	-30%
Organic pharmaceutical sales	2 071	22%	4 019	54%	-1 948	-49%
Rx	*1 462*	*16%*	*1 433*	*19%*	29	2%
Branded	1 293	14%	1 261	17%	32	3%
Non-branded	169	2%	172	2%	-3	-2%
*OTC*	*609*	7%	*2 586*	*34%*	*-1 976*	*-76%*
TPP	2 062	28%	2 835	38%	-233	-8%
Government procurement	1 595	17%	767	10%	828	108%
Commercial	1 007	11%	2 068	28%	-1 061	-51%
Other sales – substances	299	3%	254	3%	45	18%
Medical equipment	184	2%	184	2%	0.2	0.1%
Services to third parties (incl. CMO and agency fees)	513	6%	223	3%	289	130%
Sale of finished goods and raw materials to OTCPharm (spin-off effect)	*3 596*	*39%*	-	-	*3 596*	*100%*

Q2/H1 2014 Sales Results Conference Call

Moscow, August 14, 2014 – OJSC Pharmstandard (LSE: PHST LI, RTS: PHST RU) will be announcing its Q2/H1 2014 sales results on Thursday, August 14, 2014 at 17:00 PM Moscow time.

Pharmstandard takes pleasure to invite you to participate in Q2/H1 2014 sales results Conference Call followed by a Q&A session.

Conference Call will take place on

Thursday, August 14, 2014

09:00 New York

14:00 London

17:00 Moscow

UK Call-in Number: +44(0)20 7136 6283

US Call-in Number: +1646 254 3364

Russia Call-in Number: +7499 922 3967

Confirmation code: 3880083

Pharmstandard will be represented by:

Igor Krylov, CEO