Moscow, 28 July 2011 – OJSC Pharmstandard (LSE: PHST IL, RTS: PHST RU) reports its non-audited sales results for 1H2011.

Sales of Pharmstandard for 1H2011 amounted to RUR 18,450.2 million and grew by 59.8% (or RUR 6,908.8 million) in relation to 1H2010.

1H2011 Key Highlights

Company's revenue in the first six months of 2011 grew by 59.8% or RUR 6,906.8 million.
Organic sales growth amounted to 14.6%% or RUR 1,109 million.
The share of the retail sector of the Russian pharmaceutical market in the first five months of 2011 increased by 13.3%.¹
Sales of pharmaceuticals grew by 61% or RUR 6,887.4 million.
Sales of Company's own pharmaceutical products grew by 14% or RUR 1,017 million.
Sales of TPP grew by 146.5% or RUR 5,797.7 million.
Sales of medical equipment grew by 7.7% or RUR 19.3 million.

¹Source: CMR «Pharmexpert»Center of Marketing Researches

Key Developments at the Company for 1H 2011

An offer to purchase 4.9% of OJSC Pharmstandard shares

On 18 January 2011 OJSC Pharmstandard-Leksredstva announced an offer to purchase up to 4.9% of OJSC Pharmstandard shares (up to 1,850 shares) at RUR 3000 per ordinary share. This offer was valid from 18 January 2011 till 16 February 2011. On 18 February, 2011 OJSC Pharmstandard-Leksredstva indicated to its shareholders who had tendered their shares, the number of shares accepted from them based on the review of the submitted applications to sell shares ("ofertas"). Total number of accepted shares on conclusion of the deal equaled 1,824 thousand of ordinary OJSC Pharmstandard amounting to RUR 5,474 million. Payment for all duly tendered ordinary shares was effected in 1H2011. In future, the Company can use these shares to conduct merges and takeovers.

Acquisition of 55% of shares of PJSC Biolek

On 19 January 2011 the Company announced the purchase of 55% of shares of PJSC Biolek (Ukraine), a pharmaceutical facility for the production of immunobiological preparations, serums and vaccines. Pharmstandard used its own assets to finance the acquisition of the shares. Following the decision of  a shareholders meeting, in June 2011 the company was renamed PJSC Pharmstandard-Biolek. At present, it is undergoing a process of integration into the Pharmstandard Group of Companies. The main stages of this reorganization are scheduled to be completed by the end of 2011.

Increase of the Equity Capital of NauchTechStroy Plus LLC (NTS+)

In May, 2011 an extraordinary General Meeting of Shareholders of NauchTechStroi Plus LLC passed a vote to increase the equity capital of the company and to include a third party in the company. Following this decision, the shares of OJSC Pharmstandard, Alexander Shuster and OJSC Bolgar Investment Limited amounted to 37.5%, 37.5% and 25% respectively.

OJSC Pharmstandard made an additional contribution to the equity capital amounting to RUR 99.8 million. The nominal share of Pharmstandard after this increase equals RUR 249,8 millions. Alexander Shuster also made an additional contribution to the equity capital amounting RUR 99.8 million after which his participating share in the equity capital of the company amounted to RUR 249,8 million. OJSC Bolgar Investment Limited made a RUR 166,5 million contribution to the equity capital.

As of 28 July 2011, the Company's investment amounted to RUR 730 million, RUR 480 million of which have been invested in the construction of the R&D center, its equipment and furnishings and in the creation of its infrastructure. The company has no plans to make additional investment until the end of the current year.

The construction of the center is scheduled to be completed at the end of 2011. The total cost of the R&D center construction and its infrastructure will amount to over RUR 1,800 million.

Creation of Pharmstandard-Medtechnika LLC

In July 2011, OJSC Pharmstandard and the DGM Group of Companies announced the establishment of Pharmstandard-Medtechnika LLC. OJSC Pharmstandard and DGM Trading Limited formed a joint company, Moldildo Trading Limited which is the sole owner of Pharmstandard-Medtechnika LLC. The shares of OJSC Pharmstandard and DGM Group of Companies in this joint enterprise amount to 75% and 25% respectively. The main objectives of Pharmstandard-Medtechnika LLC include promotion of the full range of equipment for the construction of infection control systems and Central Sterilization Departments within medical establishments, marketing, sales (both direct and through distribution networks), provision of comprehensive services and training for clients.

Decisions of the Annual General Meeting of Shareholders (AGM) of 30 June 2011

The Annual General Shareholders Meeting voted to approve the annual report of JSC Pharmstandard for 2010; to approve the annual accounting statements; not to pay ordinary share dividends for the 2010. It elected members of the Board of Directors of OJSC Pharmstandard and approved auditors of JSC Pharmstandard for 2011.

Key Developments at the Company and at the Russian Pharmaceutical Market in 1H2011

In March 2011, Pharmstandard came top of the list of the most influential domestic pharmaceuticals producers, according the annual 'Rating of Russian Pharmaceutical Manufacturers'.

In June 2011, the Vedomosti newspaper published a list of the top 100 biggest companies of Eastern Europe with OJSC Pharmastandard in the 56th position.²

In July 2011, Decree No. 599 of the Government of the Russian Federation of 20 July 2011 was published. It stipulates that as of 1 June 2012 preparations containing codeine can be purchased only with a doctor's prescription.

This change in the status of codeine containing preparations from OTC to Rx may result in an insignificant decrease in sales of the Company's preparations included in this group, from the moment the Decree comes into force. The group of products affected by this Decree includes Pentalgin®-N, Pentalgin®-ICN, Pentalgin®Plus, Codelac®, Terpincod®.

It is worth noting that from 2008, the Company has been developing painkillers and preparations for the ARVI and flu symptoms without codeine and sold OTC.

¹Source: www.pharmvestnik.ru
²Source: www.Vedomosti.ru

Pharmaceutical Products

Revenue from sales of pharmaceuticals in 1H2011 grew by 61% and amounted to RUR 18,179 million vs
RUR 11,291.6 million in 1H2010. Revenue growth in absolute terms amounted to 6,887.4 million rubles.

In the overall pharmaceuticals sales structure, organic sales amounted to 45.6%, Third Party Products (TTP) sales amounted to 53.7%, and 0.8% represented other sales. The increase in the TPP share was due to the fulfillment of production and procurement orders under the 7 Nosologies program.
In 1H2011, organic sales increased by 14% or RUR 1,017.7 million and amounted to RUR 8,280.7 million.
The shares of the OTC and Rx preparations manufactured by the Company in its sales structure amounted to 80.2% and 19.8% respectively. This structure was determined by the bigger share of sales of seasonal and cough and cold OTC preparations.
Pharmstandard’s structure of sales, 1H 2011

Pharmstandard’s structure of sales, 2Q 2011

OTC Products

Organic sales of OTC preparations grew by 17% or RUR 967 million and amounted to RUR 6,641.9 million.
The following brands were the sales leaders: Pentalgin®, Complivit®, Codelac®, Acipol®, Afobazol®.

¹ The decrease in sales of Arbidol® in volume terms was due the launch of a new package, No. 40 (40 capsules).
² The Company became the owner of the Acipol® brand from August 2010 after the acquisition of 100% shares of CJSC Vindexpharm.

Sales of Codeine Containing Preparations

Revenue from sales of preparations (codeine free) in 1H2011 amounted to RUR 250.3 million or 12% of the total sales of codeine containing preparations.

Sales of Pentalgin®No.12 (codeine free) amounted to RUR 207.6 million which represented 17.2% of the total revenue from Pentalgin®.

Revenue from sales of Codelac® Broncho (codeine free) amounted to RUR 42.7 million representing 11.7% of the total revenue from sales of Codelac®.

RX Products

Organic sales of RX products increased by 3.2% or RUR 50.7 million and reached RUR 1,638,8 million. The following pharmaceuticals were the sales leaders: Phosphoglive®, Biosulin®, Combilipen®, Picamilon®, Azitrox®, Octolipen®.

The growth of Rx preparations (excluding Rastan®) amounted to 18.6% vs 1H2010. There was no state procurement of preparation Rastan® in 1H2011; it is planned for 2H2011.

Preparations launched in 1H2011

Four new preparations were launched in 1H2011: Glimepiride® (tablets), Complivit® Multi +Iodine (powder), Medira® (capsules), Gluconorm® (tablets). The Company's revenue from sales of the four preparations in 1H2011 amounted to RUR 11 million.

TPP Products

Sales of TPP grew by 146.5% or RUR 5,797.7 million and reached RUR 9,754 million vs RUR 3,956.3 million in the previous year. In 1H2011 the share of TPP products in the Company's structure of pharmaceutical sales amounted to 53.7%. The sales leaders were: Mabthera® (F. Hoffman-La Roche Ltd.), Velcade® (Bortezomib), Pulmozym® (F. Hoffman-La Roche Ltd.), IRS®19 and Imudon® (Solvay Pharmaceuticals), Mildronate® (JSC Grindex) and Coagil VII (Generium\Lekko).

Since April 2011, filling and secondary packaging of Prezista® (Johnson & Johnson) began at the production facilities of OJSC Pharmstandard-Ufavita. In 1H2011, supplies amounted to RUR 612,8 million which represented 6.3% of total TPP sales. In 2H2011, supplies of this preparation will amount to RUR 612 million, according to the contract terms.

In 1H2011, supplies of Intelence® (Johnson & Johnson) amounted to RUR183.3 million which represented 1.9% of total TPP sales. In 2H2011, supplies of this preparation will amount to RUR 195.6 million, according to the terms of the agreement.

In 1H2011, supplies of Coagil VII amounted to RUR 623.1 million representing 6.4% of total TPP sales.

In 1H2011, secondary packaging of Velcade® amounting to RUR 1,650.7 million and further supplies to Johnson & Johnson for subsequent realization were carried out. The share of the preparation in total TPP sales was 16.9%.

Since November 2010, secondary packaging of Mabthera® (F. Hoffman-La Roche Ltd.) has been localized at the facilities of OJSC Pharmstandard-Ufavita. The preparation was procured in 1H2010 within the framework of a state open auctions amounting to RUR 4,176.8 million, which had been won in 2010. The share of Mabthera® in total TPP sales was 42.8%.

In July 2011, OJSC Pharmstandard-Ufavita, under a contract with JSC Grindex, started manufacturing preparation Mildronate® (ampoules).

The Company increased production and sales of Imudon® and IRS®19 manufactured under a contract with Abbot, amounting to RUR 500.6 million in 1H2011. Their share equalled 6.4% of total TPP sales.

PJSC Biolek

At the moment the Company views its investment in PJSC Biolek as investment in an associate enterprise. The management of the Company does not exclude the possibility of obtaining full control over the entity by the end of the current year and of subsequent accounting of this acquisition as its subsidiary. Revenue of OJSC Pharmstandard-Biolek in 1H2011 amounted to RUR 207 million (UAH 58 million).

Medical Equipment

The company's revenue from the sales of medical equipment in 1H2011 grew by RUR 19.3 million or 7.7% and amounted to RUR 271.1 million vs RUR 251.8 million in 1H 2010.

At the next meeting of the Board of Directors of OJSC Pharmstandard, the question of a possible additional investment in OJSC TZMOI in order to modernise its production facilities, will be included in the agenda.

NOTICE OF 1H2011 SALES RESULTS ANNOUNCEMENT DATE 

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.