OREANDA-NEWS. Pharmstandard OJSC (LSE: PHST IL, RTS: PHST RU) (further “Pharmstandard” or the “Company” announces its unaudited FY2013/4Q2013 sales results.[1]

Key sales highlights.

FY2013 consolidated sales of the Group reached RUR55 918m demonstrating an increase of RUR4 527m (+9%) y/y.

FY2013 organic pharmaceutical sales reached RUR23 234m demonstrating RUR2 459m or +11.8% y/y growth, compared to RUR20 775m last year. Organic sales showed growth +3% ahead of the market as per LLC “IMS Health” data.

Pharmaceutical products and medical equipment accounted for 98.1% and 1.9% of the Company's total FY2013 sales, respectively

4Q2013 consolidated sales of the Group reached RUR27 351m demonstrating an increase of RUR6 857m (+33%) y/y

4Q2013 organic pharmaceutical sales reached RUR6 771m demonstrating a slight decrease of RUR 165 m or -2.4% y/y, compared to RUR6 933m in 4Q2012

FY2013 third party products sales (further “TPP”) reached RUR30 451m, growing +7.7% or RUR2 172m y/y vs RUR28 279m in 4Q2012

Pharmstandard anti-cold and flu OTC portfolio demonstrated 6% growth in 2013 y/y with despite the fact that there we no epidemic in 3Q and 4Q of 2013. Arbidol demonstrated a slight decrease of RUR168m (-4%) in 2013 y/y but mainly due to redistribution of shipments which in its turn had a significant effect on 4Q2013 indicators.

Pharmaceutical market - 2013 results[2]

The size of the Russian pharmaceutical market in 2013 is estimated at RUR822bn with a 8% growth y/y

The commercial segment of the pharmaceutical market in Russia grew by 10% to RUR608bn

Pharmstandard is the second largest pharmaceutical company operating in Russia after Sanofi-Aventis (5.3% market share) with a 3.7% market share

Pharmstandard is also the second largest player on a commercial segment of the pharmaceutical market with a 4.2% market share after Sanofi-Aventis (5.1% market share)

Pharmstandard is #1 player among local producers with a 15.8% share of the market

2013 key highlights and developments

Reorganisation. Over-the-counter spin-off.

In the course of the last several years the Company has significantly diversified its business within the Russian pharmaceutical market and has moved away from being solely focused on the OTC market. For the year ended December 31, 2012, approximately 71% of the total revenues of the Company were derived from sales of third-party pharmaceutical products, prescription pharmaceuticals and medical equipment and from other activities.

The Company's management sees a potential strategic benefit in the spin-off because operating the Branded OTC business separately may be more efficient and a separate listing of OTCPharm may attract additional investor interest so that the combined value of Pharmstandard and OTCPharm may increase. The Branded OTC business will have a separate experienced management team led by Olga Mednikova, presently Head of Marketing at Pharmstandard.

On September 27, 2013 Pharmstandard held an EGM to decide on the reorganization of the Company by spin-off of a new public joint-stock company (“Reorganization”) and to elect the Board of Directors of the company formed in the result of spin-off.

Taken together, the attending shareholders who took part in the EGM through a collective meeting with attendance by the shareholders to discuss the agenda issues and to make a resolution on the issues put to vote, owned 33 366 951 votes or 88.2896% of the Company's voting shares.

The Reorganization was approved by 94.9010% of the shares owned by the voters and the Board of Directors was elected. The full name of the newly created company was defined as Public Joint Stock Company “OTCPharm” (“OTCPharm”).

Shareholders who voted negatively or did not vote regarding reorganization of the Company were entitled to demand Buyout of all or some of their ordinary registered shares in the Company in the procedure stipulated by the laws of the Russian Federation. The buy-out was exercised fully.

The reorganization was completed at the date of OTCPharm state registration on December 23, 2013.

OTCPharm ordinary shares were proportionally distributed among shareholder at the ratio of ¼, i.e. 4 OTCpharm shares per 1 Pharmstandard share.

Bever Pharmaceutical PTE LTD acquisition.

On August 17, 2013 Pharmstandard held an EGM which approved the acquisition of Bever Pharmaceutical Pte Ltd (“Transaction”).

The Company's strategic rationale for the Transaction includes securing a long-term fixed-cost supply of critical active pharmaceutical ingredients for two flagship OTC brands Arbidol® and Aphobazolum® as well as significantly increasing the Company's profitability.

The amount of the transaction is USD 590million. The Transaction will be funded by the combination of Pharmstandard's shares and GDRs owned by Pharmstandard-Leksredstva OJSC in the amount of USD 542 million (price per share of RUB 2,235.4 and price per GDR of USD 20.76) and cash of USD 48 million, which may be financed from external sources. Pharmstandard-Leksredstva OJSC currently holds Pharmstand-ard's shares and GDRs on its balance sheet at approximately USD 475 million.

Bever is included into OTCPharm perimeter of operations.

Pharmstandard buy-back program

On February 15, 2013 Pharmstandard Board of Directors approved a buyback program in respect of ordinary shares of Pharmstandard OJSC and/or Global Depositary Receipts representing Shares (each Share representing 4 GRDs) in the aggregate amount of up to RUR 8bn. Announced duration of the program was December 31, 2013.

On July 17, 2013 the Company has completed the buy-back program: 15 009 162 GDRs and 140 000 ordinary shares were purchased on the open market.

Other corporate highlights.

Elena Arkhangelkaya to head Industrial and Manufacturing unit.

One of the main trends on a Russian pharmaceutical market is product localization when western pharmaceutical companies try to localize production of imported drugs.

One of the Company's main strategic goals is to establish leadership of Pharmstandard in contract manufacturing in Russia. With this, the Company has formed an Industrial and Manufacturing Unit which will be responsible for developing of new concepts of production management, long-term planning, quality management, management of new developments and technology transfer.

Elena Arkhangelskaya, Pharmstandard CFO, has made a decision to head the Industrial and Manufacturing unit of the Company's business. Elena has been Pharmstandard CFO for more than 10 years.

Marina Markova, previously Head of Finance Department, is appointed CFO of Pharmstandard. Marina has been with the Company since 2011.

Organic sales overview.

FY2013 organic pharmaceutical sales amounted to RUR23 234m (+11.8%) vs RUR20 775m in FY2012 with 71% accounted for by OTC products and 29% by Rx products.

4Q2013 organic pharmaceutical sales remained at the level of FY2012 reaching RUR6 771m and demonstrating a slight decrease of RUR 165 m or -2.4% y/y mainly due to a more even distribution of shipments in 3Q2013 and 4Q2013.

FY2013 Organic prescription product (Rx) sales grew by RUR880m (+14.9%) to reach RUR6 776m. Key growth drivers were Phosphoglive® (+18.2%), Combilipen® (+28.7%), Pentalgin® (+52.3%) and Altevir® (+140.8%).

The portfolio of drugs containing codeine which was moved to the Rx segment in 2012 showed significant growth +48% in 2013 y/y: Pentalgin®(+52%), Therpincodum® (50%), Codelac® (+29%). Portfolio total revenue added up to RUR642m in 2013 compared with RUR435m a year earlier.

FY2013 Organic over-the-counter (ОТС) product sales went up to RUR16 458m (+10.6%). FY2013 Arbidol® sales demonstrated a slight decrease y/y reaching RUR3 807m. A significant increase in sales y/y was demonstrated by Aphobazolum® (+46%), Amixin® (+39.8%), Acipol® (+56.8%) and Magnelis® (+64.3%).

FY2013 OTCPharm portfolio sales reached RUR14 014m demonstrating 11% growth y/y vs RUR12 623m.

Third Party Products sales overview.

For a better visibility we move TPP sales into a separate section splitting the revenue into 2 parts - government procurement and commercial sales.

Government procurement. 7 Nosologies Federal Program.

FY2013 sales leader of this segment is Mabthera® with a 29% share of TPP revenue. Historical leader Velcade® has decreased its share to 19% with the majority of auctions being moved to the 4Q2013; FY2013 Velcade® sales reached RUR5 216m.