OREANDA-NEWS. February 15, 2011. OJSC Pharmstandard (LSE: PHST IL, RTS: PHST RU, MICEX: PHST), announces unaudited consolidated IFRS-compliant sales results for 2010.

Key developments at the Company in 2010

Pharmstandard won in the 'Pharmaceutical Industry' nomination category of the national business award competition 'Company of the Year 2010'.

As in the previous year, Arbidol® remains the best performing retail brand. Arbidol®'s share of the total pharmaceutical retail sales in Russia was 1.5%.

In August 2010, OJSC "Pharmstandard" acquired 100% of the shares of CJSC "Vindexpharm". CJSC "Vindexpharm" owns the Acipol® trademark. Since the closure of the acquisition deal and the beginning of its sales under the Company's brand, sales of Acipol® amounted to RUR 140 million.

According to "Pharmexpert" Market Research Centre, retail sales of the product in 2010 amounted to RUR 337 million which represented an increase of 17.5% in relation to RUR 287 million in 2009.

Pharmstandard launched 12 new products: Pentalgin®, Acipol® (capsules), Formetin® (850 mg and 1000 mg tablets), Phosphogliv® forte (capsules), Artrozan® (solution for intramuscular injection 6 mg/ml), Complivit® Calcium D3 forte (tablets), Complivit® Calcium D3 for young children (powder), Complivit® Trimestrum 1,2,3, trimester (tablets), Maxicold® Rino (powder), Selmevit® Intensive (coated tablets).

Sales proceeds of the Company for the products launched in 2010, amounted to RUR 262 million or 1.4% of the Company's organic sales of pharmaceuticals, RUR 140 million of which resulted from sales of Acipol®. It is worth taking into consideration that sales of the majority of the new pharmaceutical products commenced in the 4th quarter of 2010.

Pharmstandard registered retail prices for 98 pharmaceuticals produced by the company (taking into account all forms and dosages) included in the Vital and Essential Pharmaceuticals (VEP) List for 2010. The Company's revenue from sales of the pharmaceutical products included in the VEP List reached RUR 9.568 million which accounted for 50.5% of the company's organic sales revenue in 2010.

In September 2010, OJSC "Pharmstandard" and State Corporation "ROSTEKHNOLOGII" signed a co-operation agreement. According to the agreement, the Corporation will provide assistance in the implementation of OJSC "Pharmstandard" projects related to (re-)equipment and servicing of high-tech medical facilities at medical establishments in the territory of the Russian Federation.

The OJSC "Pharmstandard" and "Johnson & Johnson" LLC entered into mutual agreement and successfully realized the project to localize secondary packaging of the product Velcade® (INN Bortezomib) on the Company`s production facility OJSC "Pharmstandard-Ufavita". The sales of the product in 2010 achieved to RUR3.838 million.

The annual national business award 'Company of the Year' is organized by RBK Holdings.

According to the data base of Market Research Centre 'Pharmexpert' for 2010.

Implementation of biotechnological project GENERIUM:

As of the end of 2010, the total investment in Nauchtech Stroy Plus Ltd. for construction of a R&D centre specialising in development and implementation of bioengineered pharmaceutical and diagnostics products amounted to RUR 630 million, RUR 150 million of which was the equity capital share in Nauchtech Stroy Plus Ltd. Construction and installation works, building communication network and construction of roads within the R&D centre have been completed. Interior furnishing and equipment installation have begun.

In 2010, RUR 1.799 million worth of CoagilVII(Eptacog Alfa) was supplied. CoagilVII(Eptacog Alfa) is produced within the framework of the joint biotechnology project GENERIUM by CJSC GENERIUM and OJSC Pharmstandard. The product Diaskintest® for the total amount of RUR 135 million (excluding VAT) was supplied under the Federal TB Control sub-programme in 2010.

At present, 5 new pharmaceutical products which are being developed through the joint bio-technology project GENERIUM, are undergoing clinical trials.

In 2011 the Company is planning to invest no less than an additional RUR 150 million in the completion of the R&D center construction. By the end of 2011, laboratories of molecular biology, cellular technology and bio-chemistry will be operational; 41 residential buildings for R&D personnel accommodation, a cultural and business center, a general communications network and municipal amenities will be competed.

Key Developments at the Company in 2011

On 18 January 2011 OJSC Pharmstandard-Leksredstva announced an offer to purchase up to 1,850 of OJSC Pharmstandard shares at RUR 3000 per ordinary share. This proposal is valid from 16:00 Moscow time on 18 January 2011 till 18:30 Moscow time on 16 February 2011 provided the Company does not decide to extend the proposal term.

On 19 January 2011 the Company announced its purchase of 55% of shares in PJSC Biolek. Pharmstandard used its own assets to finance acquisition of the shares. PJSC Biolek is a Top-20 Ukrainian pharmaceutical company and specializes in the production of immunobiological drugs, vaccines, serums, diagnostics products, nutrient mediums, blood products, hormonal, antiviral, antibacterial and enzymatic drugs. The Biolek`s revenue for 2010 was RUR 547 million (UAH 143 million) which represents an increase of 34.7% over RUR 406 million (UAH 106 million) for the previous year.

As per Central Bank rate on 31.12.2010: UAH 10 = RUR 38.28.

Russia's Pharmaceutical Market in 2010 and 2011.

On 1 September 2010 the basic provisions of Federal Law No. 61-FZ "On the Circulation of Pharmaceuticals in the Russian Federation" came into force.

In October 2010, Russian Federation Government Decree No. 1660-r introduced Federal Target Programme "Development of the Pharmaceutical Industry of the Russian Federation for the period until 2020" which established a policy of support for national producers and substitution of imported products. The Programmer’s funds have been allocated to construction of new and modernisation of existing production facilities and the introduction of GMP standards. Investment funds: USD 5.675 million.

 One of the most significant developments affecting the Russian pharmaceutical market, was the introduction of price regulation which resulted in negative dynamics of prices for most pharmaceutical products. This led to growing consumer demand, yet somewhat slowed down the rate of market growth in value terms. The state sector has enjoyed an increase in sales of expensive high-tech pharmaceuticals. In 2011 the growth in purchase of expensive pharmaceuticals will continue; it is likely that purchase of Russian-produced pharmaceuticals (including that of high-tech products) will also increase which will keep in check the growth of prices in the hospital sector. In 2011, the growth in value terms will amount to 12-17%. According to the Market Research Centre"Pharmexpert": “Should the market follow a realistic scenario in the following years, it would be reasonable to expect its steady development with an annual growth of 18-22%. By 2015, the volume of the Russian pharmaceutical market will reach USD 42-48 billion”.

The primary trends of market development in a realistic scenario will be: increase of the share of high-tech pharmaceuticals in the volume of Government procurement; increase of the share of locally produced pharmaceuticals in all the sectors of the pharmaceutical market; new generation pharmaceuticals will be rapidly replacing old-fashioned products in the structure of the commercial retail sector.

According to the Market Research Centre "Pharmexpert": “A new scheme of medicine provision for a number of regions is scheduled to be launched in 2012. Its objective is direct reimbursement of the cost of pharmaceutical products to the pharmacies. This project will become a point of departure in the process of creating the system of drug insurance”.

We expect that in the following year the market will continue growing in value terms, though a significant “burst” in physical indicators is unlikely to happen. Nevertheless, it is clear that the demand for medicines will grow if the economic situation in the Russian Federation improves.

The Company’s sales results for 2010*

According to the unaudited accounts, sales proceeds of the Company in 2010 grew by 23.3% and amounted to RUR 29.719 million which is RUR 5.624 million more in comparison to RUR 24.095 million in 2009.

The share of pharmaceutical sales of the Company accounted for 97.9% of the total revenue. Pharmstandard's revenue from sales of medical equipment accounted for 2.1% of company's total sales.

Total sales increase for pharmaceutical products (taking into account third-party products) was 24.3% or RUR 5.682 million; sales volume of pharmaceutical products was RUR 29.089 million.

Organic increase in sales of pharmaceutical products (without third-party products) was 11.5% or RUR 1.979 million, totaling RUR 19.229 million.