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Pharmstandard company presentation

Pharmstandard company presentation. Business & Financial results, 2007. Disclaimer and Confidentiality Requirements.

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Pharmstandard company presentation

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  1. Pharmstandard company presentation Business & Financial results, 2007

  2. Disclaimer and Confidentiality Requirements This presentation does not constitute or form part of and should not be construed as, an offer to sell or issue or the solicitation of an offer to buy or acquire securities of OJSC Pharmstandard (the “Company”) or any of its subsidiaries in any jurisdiction or an inducement to enter into investment activity. No part of this presentation, nor the fact of its distribution, should form the basis of, or be relied on in connection with, any contract or commitment or investment decision whatsoever. This presentation is only for persons having professional experience in matters relating to investments and must not be acted or relied on by persons who are not Relevant Persons (as defined below). Solicitations resulting from this presentation will only be responded to if the person concerned is a Relevant Person. This presentation is made to and directed only at (i) persons outside the United Kingdom, (ii) qualified investors or investment professionals falling within Article 19(5) and Article 49(2) (a) to (d) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”), and (iii) high net worth individuals, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (such persons collectively being referred to as "Relevant Persons"). This presentation and its contents are confidential and must not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other person, whether or not such person is a Relevant Person. Failure to comply with this restriction may constitute a violation of applicable securities laws. If you have received this presentation and you are not a Relevant Person you must return it immediately to the Company. This presentation does not constitute a recommendation regarding the securities of the Company. This presentation includes 'forward-looking statements'. These statements contain the words "anticipate", "believe", "intend", "estimate", "expect" and words of similar meaning. All statements other than statements of historical facts included in this presentation, including, without limitation, those regarding the Company’s financial position, business strategy, plans and objectives of management for future operations (including development plans and objectives relating to the Company's projects and services) are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company to be materially different from results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company's present and future business strategies and the environment in which the Company will operate in the future. These forward-looking statements speak only as at the date of this presentation. Each of the Company and the Selling Shareholder and their respective agents, employees and advisers, expressly disclaims any obligation or undertaking to update any forward-looking statements contained herein. The information and opinions contained in this document are provided as at the date of this presentation and are subject to change without notice. All information not separately sourced is from Company data. 2

  3. Today’s Presenting Team Dr. Igor Krylov CEO, Chairman of the Management Board and Member of the Board of Directors Elena Arkhangelskaya Chief Financial Officer Dr. Olga Mednikova Chief Sales and Marketing Officer 3

  4. Dr. Igor Krylov,CEO Company Overview 4

  5. Pharmstandardat a Glance Market Leading domestic pharmaceutical company in Russia (measured by sales) • #3 pharma company overall in Russia by sales value in 20071 • #1 pharma company in the Consumer spending (Commercial retail) pharma market by sales value in 20071 Modern and efficient manufacturing facilities • 4 pharmaceutical production sites and 1 medical equipment and disposables plant • Russian GMP compliant facilities, some of which are EU GMP compliant • 200 branded and non-branded pharmaceutical products • Capacity – more then 1.3 billion packs Experienced sales and marketing people • More then 340 sales people and 25 actively promoted brands • 6 brands among top-20 best selling domestic brands in Russia1 Arbidol®, Pentalgin®, Complivit®, Terpincod®, Codelac®, Flucostat® Since IPO (May’2007) Pharmstandard is listed on LSE, RTS • Industry leading growth EBIDTA margin and profitability • Market capitalization more then $3.5 billion (60% growth from IPO) Production Sales & Marketing Financials Source 1 Pharmexpert, preliminary data, in retail prices. Subject to change. . 2 Company As at 31 December 2007 5

  6. 25.0 20.0 15.0 10.0 5.0 1.1 1.3 1.4 1.5 1.6 1.7 1.8 1.9 2.1 2.3 0.0 2003 2004 2005 2006 2007 2008E 2009E 2010E 2011E 2012E Hospitals Commercial FRP Russia pharmaceutical market development CAGR 07-12 Total market-15% CAGR 07-12 Commercial segment-17% 2.5 2.5 2.5 2.5 USD mln 2.5 2.0 2.5 1.4 11.0 12.9 15.1 17.5 9.4 7.8 6.7 5.6 5.1 4.4 Source: Pharmexpert preliminary data, retail prices 2007. Subject to change. 6

  7. Retail market by countries, value and growth (%) Russia $8 000 mln +17% Europe $130 000 mln +5% USA $250 000 mln +5% Japan $63 000 mln +2% Source: Pharmexpert presentation on Аnnual Conference, St. Petersburg, March, 2008, manufacture prices 7

  8. 180 160 160 141 140 124 109 120 96 100 Consumption per capita ($) Consumption per capita ($) 79 75 80 59 60 44 38 40 20 0 2003 2004 2005 2006 2007 2008E 2009E 2010E 2011E 2012E 350 330 303 300 251 258 238 230 250 200 160 160 144 145 149 135 150 100 63 49 50 0 Greece Hungary Czech Republic World East- Central Europe Poland Russia 2006 2007 Russian Pharma Market Set to Expand Pharmaceutical Consumption Per Capita in Russia($)* * in retail prices • Drug consumption per capita expected to double in 2011 due to strong macroeconomic driving consumer boom • Growing access to medicines in retail market by active development of distribution companies and pharmacy chains • Increased consumer focus on health and well being in line with demographic trends Pharmaceutical Consumption Per Capita by Country($)** ** in producers' prices Source1: Pharmexpert, preliminary data, subject to change Source2: Renaissance, EU Market Indicators 8

  9. Russian Pharmaceutical market structure 2007 Market structure by sales channels based on 2007 Market split between domestic and international competitors 2007 3,8 bn units Hospitals 10% Volume IMPORT; 34% DOMESTIC; 66% FRP (Packs) 17% 11,4 bn USD Value IMPORT; 78% DOMESTIC; 22% (USD) Commercial 73% Commercial FRP 0% 20% 40% 60% 80% 100% Hospitals IMPORT DOMESTIC Source: Pharmexpert preliminary data, retail prices 2007. Subject to change. 9

  10. FRP – Update Key facts • 2007 budget was set at RUR 40bn (RUR 51.2bn spent)1 • 2006 budget was set at RUR 34bn (RUR 67.9bn spent) • 2005 budget was set at RUR 50.8bn (RUR 39.6bn spent) • Resulted in a number of products being removed from the FRP list both voluntarily and involuntarily by pharma companies as FRP officials ask for even longer payment terms and simultaneously cut prices • 16.9 million participants eligible – 5.5 million currently enrolled Current status • 2006 debts fully paid • 2008 FRP budget is set at RUR 58bn plus RUR 10bn reserved • FRP was divided in two parts on federal and regional level • Going forward Government focused on including generic domestic products on FRP list rather than expensive foreign products • Currently only 7% of the total FRP market is serviced by Russian pharma companies • FRP is recovering, domestic pharmacompanies appear to be future beneficiaries Source: Pharmexpert preliminary data, retail prices 2007. Subject to change 10

  11. Low Exposure to FRP Composition of Leading Companies’ Sales in Russia by Market Segment in 2007 100 2 4 4 5 7 3 11 12 12 14 16 8 3 6 4 25 12 46 65 61 % 50 95 87 87 82 82 72 68 50 31 27 0 ROCHE PFIZER SANDOZ PHARMA NOVARTIS JANSSEN-CILAG SANOFI-AVENTIS BAYER SCHERING GEDEON RICHTER PHARMSTANDARD BERLIN-CH/MENARINI Hospital FRP Commercial • Pharmstandard has a lower exposure to the FRP compared to its peers Source: Pharmexpert preliminary data, retail prices 2007. Subject to change. 11

  12. Pharmstandard position in the ATC1 categories of Consumer spending (commercial retail) pharma market by value, 2007 Top 5 ATC1 categories occupies 67% of total Commercial retail market A - ALIMENTARY TRACT AND METABOLISM R - RESPIRATORY SYSTEM PHS #5 C - CARDIOVASCULAR SYSTEM N - CENTRAL NERVOUS SYSTEM J - GENERAL ANTI-INFECTIVES SYSTEMIC G - GENITO-URINARY SYSTEM AND SEX HORMONES M - MUSCULO-SKELETAL SYSTEM D - DERMATOLOGICALS L - ANTINEOPLASTIC AND IMMUNOMODULATING AGENTS PHS #2 V - VARIOUS S - SENSORY ORGANS B - BLOOD AND BLOOD FORMING ORGANS H - SYSTEMIC HORMONAL PREPARATIONS (EXCLUDING SEX HORMONES) K - HOSPITAL SOLUTIONS PHS #25* PHS #1 P - PARASITOLOGY T - DIAGNOSTIC AGENTS PHS #1 *PHS growth +19% Segm growth +12% Source: Pharmexpert preliminary data, retail prices 2007. Subject to change. 12

  13. Growth Analysis Across Market Segments1 Domestic companies International companies • Pharmstandard demonstrated leading absolute growth in 2007 among its domestic and international pears Source: Pharmexpert preliminary data, retail prices 2007. Subject to change. 13

  14. 4,4% Sanofi-Aventis 4,2% Pharmstandard 3,5% 2006 – 3,1% (4th) 3,1% 2,8% Sandoz 2,7% Roche 2,6% Janssen-Cilag 2,6% Other Gedeon Richter Pfizer 69,0% 2,5% 2,4% #3 pharmaceutical company on Russian market Market Share of Top-10 Companies in theRussian Pharma Market (% 2007 in value)1 Market Share of Domestic Pharmaceutical Producers (% 2007 in value)1 Novartis Pharmstandard 16,3% 2006 – 15,0% (1st) Nizpharm (Stada) 10,1% Bayer Shering Pharma Otechestvennye lekarstva Berlin-Chemie/Menarini 5,0% Pharm-Center 4,0% Other Materia Medika 46,9% 3,5% Mikrogen NPO 3,4% Moshimpharmpreparaty Veropharm ZAO Veropharm ZAO 2,2% Akrichin (Polpharma) Biotek 3,2% 2,6% 2,9% • #3 pharma company in Russia overall • #1 domestic pharma company Source: Pharmexpert preliminary data, retail prices 2007. Subject to change. 14

  15. Market Share — Top 10 Companies1 Pharmstandard 4,6% 2006 – 4,2% (2nd) A Leader in the Consumer spending (Commercial retail pharma market) of Russian Pharma market Market Share—Top 10 Domestic Companies1 Pharmstandard 18,7% 2006 – 17,0% (1st) Nizpharm (Stada) Sanofi-Aventis 9,4% 4,2% Materia Medika Berlin Chemie/Menarini 4,2% 3,4% Sandoz Otechestvennye 3,0% lekarstva Novartis 4,0% 3,0% Mikrogen NPO Bayer Shering Pharma 3,2% 2,9% Pfizer Biotek Other 2,9% 2,7% 50,2% Gedeon Richter Akrichin Veropharm ZAO 2,8% (Polpharma) 2,6% Other Nycomed 2,3% 67,8% Servier 2,8% Krasnogorskleksredstva Pharm-Center 2,7% 2,4% 2,4% • PHS is #1 in Consumer spending (Commercial retail pharma market) • is 73% of the total market Source: Pharmexpert preliminary data, retail prices 2007. Subject to change. 15

  16. Pharmstandard Key Development Milestones 4Q03: Acquisition of ICN’s business in Russia (five factories, distribution centres and pharmacy chain) 2H05: Sale of Marbiopharm (pharma production facility) Creation of holding company/ legal restructuring finalised 2H06: Termination of production in Oktyabr plant in St Petersburg, production transferred to other existing sites Acquisition of Masterlek (3.5% share of domestic Russian Pharma market by sales value) Leksredstva plant (Kursk) May 2007: Pharmstandard successfully completed its IPO, selling 43% of its share capital to the international and domestic institutional investors 4Q06: New production of spray, tablets and capsules; central manufacture laboratory and renovation of production facilities Total investment since 2004: approximately RUR 600m Pre 2003: Group consisted of two manu-facturing facilities (Ufa and Phytopharm) operating under Biovit LLC 2004 2005 2006 2007 2008 2003 Q104: New management team brought in with experience in international and domestic pharma companies 2Q04: Close Polypharm (pharma production facility) 1H05: Acquisition of TZMOI (Tyumen)—manufacturer of medical equipment Open centralised warehouse for pharmaceutical products in Moscow 1H06: New production of solutions, production of vitamins and insulin at Ufavita plant (Ufa). Total investment since 2004: approximately RUR 730m May 2006: Legal name changed from Biovit LLC to OJSC Pharmstandard 2007: Solvay and Pharmstandard has signed the agreement on manufacturing two pharmaceutical products Imudon® and IRS 19® in Russia Start production of Arbidol and Flucostat on Leksredstva ( Kursk) 1Q08: Acquisition of 19,88% shares of «DIPAKA TRAIDING LIMITED», which owns Mirpharm Signing agreement with Grindeks on exclusive distribution and promotion of Mildronate® Source: Company Note: OJSC – Open Joint Stock Company, LLC – Limited Liability Company 16

  17. Phytopharm Capacity: 56m Pharmstandard HQ Moscow Kursk Nizhny Novgorod Tyumen Ufa Tomsk Leksredstva Capacity: 719 m Ufavita Capacity: 230 m TZMOI Tomskhimpharm Capacity: 332 m Modern Production Facilities Source: Company Note: Capacity in packs. Figures shown are as of 31 December 2007 17

  18. Production Facilities – Summary Overview Source: Company. Note: Total capacity calculations assume 8-hour shifts and 5 day working week 18

  19. Diversified Product Portfolio in 2007 Pharmaceuticals 86% of 2007 sales Medical Devices 14% of 2007 sales Rx1 15% of 2007 sales OTC 85% of 2007 sales • Product portfolio includes: • Sterilisers (72% of sales) • Distillers (5% of sales) • Medical disposables (23% of sales) • Therapeutic focus: • Analgesics • Cough & cold • Vitamins • Anti-viral • Anti-fungal • Product portfolio includes: • Acid pump inhibitors • Nitrites & nitrates • ACE inhibitors • Alimentary tract metabolism 37% growth (23%)2 23% (12%)2 growth 33% growth 33% (21%)2 revenue growth in 2007 Source:Company Note: 1 Includes Other sales 2 Pro forma 2006 19

  20. Pharmstandard achievements 2007 • Leading domestic pharmaceutical company in Russia (measured by sales)1: • #3 pharma company overall in Russia • #1 pharma company in the commercial segment • Significant growth in sales and profitability2: • Revenue growth +33% and achieved $445 mln • Gross profit growth +39% and achieved $268 mln or 60% of sales • EBITDA growth +50% and achieved $191 mln or 43% of sales • Net profit growth + 60% and achieved $ 128 mln or 29% of sales • Market leading brands and new launches: • Arbidol® is a leader of Russian Consumer spending pharma market (measured by sales)1 • 6 brands among top-20 best selling domestic brands in Russia1 • Launched 10 new products – $ 13.7 mln or 3% of total sales. • New long-term projects and acquisitions: • Co- рroduction contract with Solvay Pharma (IRS-19, Immudon) • Acquisition 20% of Mir-Farm company (R&D base for future development) • Exclusive sales contract with Grindex ( Mildronat® ) in Russia • Successful completion of Masterlek integration Source: Company 1 Pharmexpert,preliminary data, in retail prices. Subject to change. 2 As at 31 December 2007 20

  21. 50% 41,6% 39,4% 37,6% 80% 40% 33,4% 63,8% 60,3% 59,1% 52,9% 27,5% 49,4% 48,3% 48,1% 60% 30% 22,4% 40% 20% 20% 10% 3,9% 0% 0% Stada Aspen Hikma KRKA Gedeon Richter Stada KRKA Hikma Aspen Veropharm Richter Gedeon Veropharm Pharmstandard Pharmstandard 35% 50% 42,9% 28,7% 30% 40% 32,2% 32,2% 25% 30,0% 18,4% 17,9% 25,4% 25,4% 17,0% 30% 20% 14,9% 14,0% 20,2% 15% 20% 6,7% 10% 10% 5% 0% 0% Stada Aspen Hikma KRKA Richter Stada Gedeon KRKA Hikma Aspen Richter Gedeon Veropharm Veropharm Pharmstandard Pharmstandard Core Comparables Benchmarking Gross margin (2007) Sales growth (2007) EBITDA margin (2007) Net profit margin (2007) • PHS has industry leading growth EBIDTA margin and profitability Source: Renaissance estimations. Company reports. Source: Renaissance 21

  22. Pharmstadard’s investment case since IPO Pharmstandard IPO placement structure Russian consumer stocks performance in 2007 vs RTS Index (%) • Offer structure: • 43.3% of total shares • Date of placement – May 4, 2007 • Price • $58.2 for share • $14.55 for GDR • Stock Exchange (PHST): • LSE - 25% in GDRs • RTS, MICEX - 18.3% • Underwriters: • UBS and Citigroup • Depositary for GDR: • Bank of New York Pharmaceutical stock performance (rebased %) GDRs Pharmaceutical stock performance (rebased %) Local shares Source: Bloomberg, Renaissance 22

  23. Our Strategy • Promote our market-leading brands to drive sales growth and profitability • Launch new products on a regular basis • Expand sales and marketing effort • Continue to actively control costs • Grow through acquisitions • Exploit opportunities from Federal Reimbursement Programme (FRP) • Building a top-3 pharmaceutical company in Russia 23

  24. Dr. Olga Mednikova, Chief Sales and Marketing Officer Sales & Marketing Overview 24

  25. Promote our market-leading brandsto drive sales growth and profitability Leading domestic pharma trademarks by sales value in 2007 Trademark Ranking in 2007 Ranking in 2006 ARBIDOL1 1 1 PENTALGIN 2 3 MEXIDOL 3 2 • Arbidol is #1 on Consumer spending pharma market • 6 leading brands • “Top of mind” position with consumers • Significant brand loyalty • 5 leading brands improve their positions • 3 leading brands among top-20 on the total Consumer spending pharma market SODIUM CHLORIDE 4 5 TREPINCOD 5 6 VIFERON 6 7 COMPLIVIT 7 10 HOWTHORN 8 4 9 12 FLUKOSTAT1 FENOTROPIL 10 8 CEFAZOLIN 11 13 CORTEXIN 12 19 CYCLOFERON 13 17 CAPSICI ANNUI TINCTURE 14 18 CODELAC 15 20 ESSLIVER 16 11 GLUCOSE 17 16 CHONDROLON 18 38 CORVALOL 19 15 BIPHIDUMBAKTERIN 20 14 Exclusively produced by Pharmstandard Produced by Pharmstandard Source: Pharmexpert preliminary data, retail prices 2007. Subject to change. Note: 1 Masterlek Brands 25

  26. 840 1 485 2 316 831 975 1 163 1 322 159 899 1 206 1 314 108 471 663 623 -40 296 435 502 68 222 375 412 36 82 80 85 5 34 49 85 36 29 23 56 33 17 31 56 25 1 190 1 212 1 465 253 6 722 1 513 OTC Products – Top-Selling Products 2005 Sales RURm 2006 Sales RURm 2007 Sales RURm Sales growth in 2007 RURm % Growth in 2007 ATC-2 Therapeutic segments Product Arbidol1 Anit-viral 56% Terpincod Cough And Cold 14% Pentalgin Analgesics 9% Complivit Vitamins -6% Flukostat1 Anti-fungal 16% Codelak Cough And Cold 10% Askophen-P Analgesics 7% Ingalipt Cough And Cold 72% Codelak-Phyto Cough And Cold 145% Rinostop Nasal preparationis 79% Other 21% TOTAL OTC products sales 5 055 8 235 23% Source: Company and MasterLek reports Notes: 1 Acquired as part of MasterLek acquisition on 2 August 2006, sales 2006 on pro forma basis, Pro Forma assumes inclusion of MasterLek as part of Pharmstandard as of 1 January 2006. Sales in 2005 – Masterlek sales. 26

  27. Arbidol®—#1 Pharma Brand in Russia Leading Products in Anti-infective Systemic Use Segment (2007) Arbidol® • Captured #1 brand position, in part, through active promotion by Pharmstandard sales force • Acquired as part of Masterlek transaction • Original product developed in 1987, active marketing launched in 2000 • Segment growth 2006-2007 + 31,0% (2001-2007 CAGR+42%) • Arbidol sales growth 2006-2007 +38,3% (CAGR +127%) GRIPPFERON AFLUBIN (RICHARD (FIRNM ZAO) BITTNER GMBH) 3% OTHER 4% 3% AMIXIN (PHARMSTANDARD) 5% ARBIDOL (PHARMSTANDARD) IMMUNAL 35% (SANDOZ) 6% CYCLOFERON (POLYSAN) Annual Segment Sales Dynamics1,2 7% 300 6,0 5,64 OSCILLOCOCCINUM 2001-2007 CAGR: 42% (LABORATOIRE 113,0 BOIRON) 4,70 250 5,0 10% 82,9 ANAFERON 3,89 VIFERON (FERON OOO) (MATERIA MEDIKA) 200 4,0 15% 12% 3,03 Sales (US$m) 44,9 150 3,0 Average price (US$) 1,90 100 2,0 16,4 12,2 1,49 164,7 1,24 129,1 5,5 50 1,0 97,2 3,1 74,7 63,0 41,1 30,4 0 0,0 2001 2002 2003 2004 2005 2006 2007 OTHER Source: Company Source: Pharmexpert preliminary data, retail prices 2007. Subject to change. 2 PHARMSTANDARD Source: Pharmexpert Note: Remodelled to reflect current categories Average Price (US$) 27

  28. Arbidol – Marketing Strategy Cough & Cold consumer based development and potential for Arbidol Marketing strategy Product • Arbidol is expected to become the key driver for OTC category/entire Company: Significant market opportunity Superior efficacy will drive market development and sales growth • Marketing objective is • to further increase Arbidol's brand awareness as a unique, anti-flu agent with clinically-proven efficacy • to establish strong consumption habit of flu treatment with symptomatic agent plus Arbidol New DTC campaign has been launched in Jan 2008 “To stop and deactivate virus” 1H 2H 1H 2H 1H % (millions of 05 05 06 06 07 growth consumers) Cough & Cold 34,1 33,1 34,3 33,3 34,8 +4,5% Coldrex 7,8 7,5 7,8 8,2 7,9 -3,7% Teraflu 4,1 4,9 5,2 5,0 7,9 +59,3% Arbidol 1,4 1,6 2,4 2,2 3,3 +49,6% Source: ComCon Note: Growth rate based on hy-o-hy growth, represents increase in the number of consumers • Arbidol is a key driver of the business 28

  29. Pentalgin—#1 Pain Reliever (Non-Narcotic) Top-10 Products in Analgesics Segment (2007) Pentalgin • Franchise includes Pentalgin-N® andPentalgin-ICN® • First launched Pentalgin-ICN® in 1999 and followed with launch of Pentalgin-N® in 2002 • Steadily gained market share since 2001 • Market segment growth 2006-2007 +16% (2001-2007 CAGR +17%) • Pentalgin sales growth 2006-2007+13% • (2001-2007 CAGR +28%) PENTALGIN (PHARMSTANDARD) 24% OTHER 39% TEMPALGIN (SOPHARMA) 7% BARALGIN (SANOFI-AVENTIS) ASPIRIN (BAYER SCHERING 7% PHARMA) Annual Segment Sales Dynamics1,2 SEDALGIN (ACTAVIS) 3% 6% SEDAL-O (SOPHARMA) 300 0,6 0,58 ALKA-ZELTCER (BAYER 3% SCHERING PHARMA) 2001-2007 CAGR: 17% 3% EFFERALGAN (BMS) NUROFEN (BOOTS HEALTHCARE INTERNATIONAL) 0,46 250 0,5 3% 0,39 SOLPADEINE (GSK) 3% 3% 200 0,4 64,5 Source: Pharmexpert 0,31 Sales (US$m) 58,4 Average price (US$) 150 0,3 50,6 0,25 0,24 30,9 0,20 100 0,2 24,9 24,5 176,9 152,6 17,5 131,3 0,1 50 105,9 104,0 102,7 75,7 0 0,0 2001 2002 2003 2004 2005 2006 2007 OTHER Source: Company Source: Pharmexpert preliminary data, retail prices 2007. Subject to change. 2 PHARMSTANDARD Average Price (US$) 29

  30. 1H 2H 1H 2H 1H % Product (millions of 05 05 06 06 07 growth consumers) Solpadein 1,5 1,6 1,5 1,3 1,1 -10,7% All other 28,0 27,9 26,4 25,6 24,9 -2,7% Pentalgin 7,9 7,4 6,1 5,9 6,2 +4,6% Pentalgin – Marketing strategy Non-narcotic analgesics consumer based development and potential for Pentalgin Marketing strategy • Pentalgin has been keeping leading position since 2001 and demonstrating stable growth • Pentalgin is expected to be further driver of OTC category • Marketing objective is to • keep conversion consumers from old traditional analgesics to Pentalgin through communication of Pentalgin's USP/Best-In-Class efficacy • to capitalise on Pentalgin’s brand recognition by launching Pentalgin plus® in new (improved) formulation (launched Mar 2008) • introduce additional new formulations of this leading product to consumers by taking advantage of current brand loyalty Source: Comcon Note: Growth rate based on hy-o-hy growth, represents increase in the number of consumers 30

  31. Complivit - #1 Vitamin (Vitamins + Minerals) Multivitamins with Minerals Market Share Breakdown (2007) • Complivit has been leading brand since 2001 • Pharmstandard had 19.7% market share in 2007 • Market segment growth 2006 - 2007 + 8% • (2001-2007 CAGR +15% ) • Complivit sales growth 2006–2007 + 32% (2001-2007 CAGR +19%) COMPLIVIT (PHARMSTANDARD) 15% VITRUM (UNIPHARM INC.) 8% SUPRADYN (BAYER SCHERING PHARMA) Other 6% 48% ELEVIT PRONATAL (BAYER SCHERING PHARMA) 4% Annual Segment Sales Dynamics1 MERZ SPEZIAL DRAGEES 200 (MERZ GMBH) 6,23 2001-2007 CAGR: 15% 4% 6,0 180 5,82 35,1 BIOVITAL GEL FOR CHILDREN 5,38 27,6 160 (BAYER SCHERING PHARMA) 5,0 4,97 26,8 MULTI-TABS JUNIOR 4% 140 4,42 VITRUM PRENATAL FORTE (FERROSAN) 4,03 4,0 (UNIPHARM INC.) 120 2% 19,3 4% 3,40 Average price (US$) Sales (US$m) 100 18,5 3,0 MULTI-TABS KID VITRUM BEAUTY 16,7 80 (FERROSAN) (UNIPHARM INC.) 143,9 14,7 142,8 135,9 2% 3% 2,0 60 102,4 91,0 40 81,2 63,1 1,0 20 0 0,0 2001 2002 2003 2004 2005 2006 2007 OTHER PHARMSTANDARD Average Price (US$) Source: Company Source: Pharmexpert preliminary data, retail prices 2007. Subject to change. 2 31

  32. Product 1H 2H 1H 2H 1H % (millions of 05 05 06 06 07 growth consumers) 3,0 2,7 3,7 3,5 3,9 +11,5% Complivit Vitrum 2,4 2,0 2,3 2,0 2,4 +16,3% Centrum 1,6 1,7 1,7 1,6 2,0 +26,4% 13,0 11,5 10,6 9,9 10,0 +0,8% All other Source: Comcon Note: Growth rate based on hy-o-hy growth, represents increase in the number of consumers Complivit – Marketing strategy Vitamins consumer based development and potential for Complivit Marketing strategy • Complivit demonstrates above-market sales growth and expected to continue to be the most popular “Russian vitamin” • Marketing objectives is to • increase Complivit consumption through launching of new specialised sub-brands under umbrella (recently launched new brands Complivit Ca D3, Complivit sugar free, Complivit 365) • Increase brand consumptionamong current users through increasing of period of usage (communication of Comlivit as “annual vitamin” ) 32

  33. 2005 Sales RURm 2006 Sales RURm 2007 Sales RURm Sales growth in 2007 RURm % Growth in 2007 ATC-2 Therapeutic segments Product Prescription Products—Top Selling Products Phosphogliv Hepatic protector 6 253 356 103 41% Amixin Anti-viral 151 217 247 29 14% Biosulin Diabet care 26 50 120 70 140% Rastan Growth hormone 0 0 53 53 16920% Pikamilon Psychoanaleptics 25 34 45 11 33% Renipril Cardiovascular 28 36 41 5 14% Azitrox Systemic Antibacterial 28 34 37 3 10% Piracetam Psychoanaleptics 13 24 37 13 54% Termikon Anti-fungal 14 35 37 2 5% Ciklodol Anti-parkinson products 10 1 29 28 2083% Other 638 646 489 -157 -24% 939 1 331 1 491 160 12% TOTAL Rx products sales Source: Company and MasterLek reports Note: Shading denotes actively promoted products 1 Acquired as part of MasterLek acquisition on 2 August 2006, sales on pro forma basis, Pro Forma assumes inclusion of MasterLek as part of Pharmstandard as of 1 January 2006. Sales in 2005 – Masterlek sales. 33

  34. BIOPHARM ZAO) LIV-52 (HIMALAYA 3% OTHER DRUG COMPANY LTD.) 9% 3% ESSENTIALE (SANOFI-AVENTIS) HEPA-MERZ(MERZ GMBH) 28% 3% THIOCTACID (PLIVA) 4% PHOSPHOGLIV (PHARMSTANDARD) 4% BERLITION (BERLIN- CH/MENARINI) 6% HEPTRAL (ABBOTT LABORATORIES) ESSLIVER (STADA 22% ARZNEIMITTEL AG) 9% Phosphogliv® – Successful Rx Product Launch Phosphogliv® Top products in Hepatic Protectors segment (2007) • Launched in 2005 • Novel product in-licensed from the Institute of Biomedical Chemistry • Premium priced product based on superior efficacy • Patent protected until 2018 • Clinically validated • 2nd generation combination therapy with anti-viral, anti-inflammatory andimmunomodulating properties Market segment growth 2006-2007 + 4% (2001-2007 CAGR +25%) Phosphogliv sales growth 2006-2007+42% (2001-2007 CAGR +149%) • Expected to be a significant growth driver going forward TYCVEOL (EUROPA- Annual segment sales dynamics1 10,05 250 2001-2007 CAGR: 25% 10,0 8,74 200 8,0 8,0 CARSIL (SOPHARMA) 4,1 6,85 9% 5,90 150 1,8 6,0 5,12 Sales (US$m) 4,55 Average price (US$) 3,86 1,5 100 196,3 194,2 4,0 1,2 0,9 130,3 0,6 50 2,0 90,9 80,1 69,5 52,2 0 0,0 2001 2002 2003 2004 2005 2006 2007 OTHER Source: Company Source: Pharmexpert preliminary data, retail prices 2007. Subject to change. 2 Based on consumer prices PHARMSTANDARD 1 Source: Pharmexpert 2 Based on consumer prices Average Price (US$) 34

  35. Sales value Market 2007 value 2007 USD mln USD mln 2,0 Maxicold® 1,0 Passifit® 0,4 Immunex® 1,2 Complivit® Ca D3 0,2 Complivit® 365 Biosulin® 4,9 Rastan® 2,2 Artrozan® 0,6 1,1 Mexiprim® 0,1 Benfolipen® New product launches in 2007 Product ATC Key Market brands Recent product launches 175,6 Coldrex, Fervex, Teraflu OTC R05A0-Cold Preparations Without Anti-Infectives 68,3 Novo-Passit, Persen N05B5-Herbal Hypnotics/Sedatives 107,9 Immunal, Immunorm L03A0-Immunostimulating Agents Excluding Interferons 45,0 Calcium D3, Calcium A12A-calcium products 231,8 Vitrum, Complivit, Multi-Tabs A11A - Multivitamins, combinations Rx A10C2-Human Insulins And Analogues 239,5 Humulin, Protaphan, Actrapid H04C0-Growth Hormones 21,0 Genotropin, Saizen, Humatrope M01A1-Anti-Rheumatics, Non-Steroidal Plain 241,1 Movalis, Voltaren, Diclofenac C01X0 -All Other Cardiac Preparations 93,2 Mexidol A11D (tablets) -vitamin B1 and combinations 15,0 Milgamma, Neuromultivit New products sales achieved $13.7 mln or 3% from total pharmaceutical sales in 2007 Source: Company Source: Pharmexpert preliminary data, retail prices 2007. Subject to change. 2 35

  36. Product Approvals and Launches 2008 Date of ATC value, expected US$m 1 launch (2007 ) Product ATC Key market brands New product launches in 2008 OTC R05A – cold preparations without Influnorm May - 08 175 Coldrex, Fervex, Teraflu anti - infectives Pentalgine plus Mar - 08 N02B – non - narcotics a nalgesics 248 Tempalgine, Baralgine, and antipyretics Nurofen, Solpadeine Complivit ophtalmo Sep - 08 A11A – multivitamins with 232 Vitrum, Multi - Tabs, minerals Supradine Complivit Se Sep - 08 A11A – multivitamins with 232 Vitrum, Multi minerals A11A – multivitamins with Vitrum, Multi Complivit Fe Sep - 08 232 minerals A11A – multivitamins with Vitrum, Multi Complivit Mg Sep - 08 232 minerals Neurocomplit Mar - 0 8 A11D – vitamin B1 and 43 Milgamma, Multi - Tabs combinations B complex, Neuromultivit Lactazar Se p - 0 8 A15A – appetite stimulants Lactasa Neosmectine Jan - 0 8 A07B – intestinal absorbent 45 Smecta, Carbone antidiarrhoeals Activated Rx Combilipen Mar - 08 A11D3 (injections) – vitamin B1 34 Milgamma, Multi - Tabs and combinations B complex Octolipen Nov - 08 A05B0 – hepatic protectors 209 Tioctacid, Berlition Neupomax Sep - 08 L03A1 – colony - stimulating 13 Neupogen, Granocyte factors Formetin Jun - 08 A10B2 – biguanide antidiabetics 21 Glucofazh, Siofor Apr - 08 Bloctran C09C0 – antgiotensine - 2 21 Losap, Diovan, Kozaar antagonists pl ain Source: Company Source: Pharmexpert preliminary data, retail prices 2007. Subject to change. 2 36

  37. Covers 75% of the Russian pharma market All sales reps have medical education/work experience Appropriately incentivised with cash bonus up to 33% of salary In 2008 looking to: Increase “feet on the street” to over 470 sales people Further specialise sales force by therapeutic area Increased product expertise Expand sales and marketing effort HQ Sales and marketing OTC Rx (incl. ENDO-Team) National manager 1 manager National manager 2 managers Real time data -ETMS Real time data -ETMS Regional manager 23 managers Regional manager 29 managers OTC sales force (134) Rx sales force (157) • Experienced sales force up to 340 sales persons1 Source: Company Note: As at 31 December 2007 37

  38. Effective Sales Force management system • Pharmbase software system allowing regular sales in/sales out analysis • Product distribution and stock on each territory • Sales performance by each territory and medical rep • ETMS system allowing effective sales people, marketing activities and clients performance management • Real time data on sales force activities allowing regional managers to more effectively manage sales force • Clients data base and prescription dynamic by each doctor • Effective clients detailing • Segmentation and targeting of clients • Daily activities and commitments • Sales Force recourses allocation analysis by each product • Data on 101 880 clients: doctors, specialists, pharmacists are already included • Effective and competitive Sales Force team 38

  39. Growth 33% 11 371 12 000 21% 11 000 14% 9 374 10 000 50% 8 523 9 000 13% 8 000 14% 44% 7 000 RUR, mln 5 685 86% 6 000 18% 87% 5 000 3 946 86% 4 000 3 000 82% 100% 2 000 1 000 0 2004 IFRS 2005 IFRS 2006 IFRS 2006 pro-forma 2007 IFRS Medical equipment and disposables PHARMA Growth Rapidly Growing Revenue Profile Achieved 21% growth in 2007 (OTC 23%, Rx 11%, Medical equip 34%) (pro-forma) Source: Company Note: 1 2005 results include results of Tyumen acquisition (as of 1 January 2005) 2 2006 results include results of MasterLek acquisition (as of 2 August 2006) 3 Pro Forma assumes inclusion of MasterLek as part of Pharmstandard as of 1 January 2006 39

  40. Elena Arkhangelskaya, Chief Financial Officer Financial Overview 40

  41. Divisional Sales Breakdown 2004-2007 IFRS basis Growth Growth 2007 2006 2005 2004 07/06 07/06, % Pharmaceutical products 9 763 7 326 4 674 3 946 2 436 33% OTC products 8 235 6 032 3 902 3 347 2 204 37% Branded generics 7 548 5 341 3 275 2 766 2 207 41% Non-branded generics 688 691 627 581 -3 0% Prescription products 1 473 1 199 733 555 274 23% Branded generics 1 207 899 440 294 308 34% Non-branded generics 266 299 293 261 -33 -11% Other sales 55 96 39 44 -42 -43% Medical equipment and 1 609 1 196 1 011 0 412 34% disposables Sale of goods 11 371 8 523 5 685 3 946 2 849 33% Pro-Forma basis 1 Growth Growth 2007 2006 2005 2004 07/06 07/06, % Pharmaceutical products 9 763 8 178 4 674 3 946 1 585 19% OTC products 8 235 6 722 3 902 3 347 1 513 23% 7 548 6 031 3 275 2 766 1 516 25% Branded generics 688 691 627 581 -3 0% Non-branded generics Prescription products 1 473 1 331 733 555 142 11% 1 207 1 025 440 294 182 18% Branded generics 266 306 293 261 -40 -13% Non-branded generics Other sales 55 125 39 44 -70 -56% Medical equipment and 1 609 1 196 1 011 0 412 34% disposables Sale of goods 11 371 9 374 5 685 3 946 1 997 21% Source: Company reports, 2004, 2005, 2006, 2007 results audited by E&Y (IFRS) Note: 1 Pro Forma assumes inclusion of MasterLek as part of Pharmstandard as of 1 January 2006. 41

  42. 12 000 3% 2% 16% 10 000 8 000 RUR, mln 6 000 11 371 9 374 4 000 2 000 0 Sales 2006 PF OTC product sales Rx product sales Med. Equipment Sales 2007 IFRS Total growth 21% (pro-forma)1 Revenue Growth Drivers • Source: Company reports • Note: • Pro Forma assumes inclusion of Masterlek as part of Pharmstandard as of 1 January 2006 • Excluding Other Pharma Sales 42

  43. Margin Expansion 2007 EBITDA Gross Profit 8 000 43% 8 000 60% 58% 56% 56% 7 000 38% 37% 7 000 6 000 44% 6 000 30% 5 000 5 000 RUR mln RUR mln 4 000 4 000 6 852 3 000 15% 3 000 5 233 4 942 4 882 2 000 2 000 3 496 3 178 3 255 1 000 1 000 1 726 1 720 583 0 0 2004 IFRS 2005 IFRS 2006 IFRS 2006 2007 IFRS 2004 IFRS 2005 IFRS 2006 IFRS 2006 2007 IFRS Pro-forma Pro-forma Gross profit EBITDA As % of sales As % of sales 39% Gross Profit growth 2006-2007 (IFRS) 50% EBITDA growth 2006-2007 (IFRS) Source: Company reports Note: 1 Pro Forma assumes inclusion of Masterlek as part of Pharmstandard as of 1 January 2006 43

  44. As % of sales Competitive Cost Structure 2007 General and Administration Costs Selling and Distribution Costs 13% 19% 2 400 2 400 2 200 2 200 15% 2 000 2 000 15% 14% 13% 1 800 1 800 1 626 1 600 1 600 8% 1 372 1 400 1 400 29% 1 268 RUR mln RUR mln 1 200 1 200 6% 6% 30% 1 069 31% 5% 1 000 1 000 24% 31% 17% 800 800 17% 10% 571 549 532 600 600 522 499 443 38% 42% 400 53% 46% 400 42% 52% 52% 74% 64% 59% 200 200 17% 62% 58% 58% 30% 26% 36% 0 0 2004 IFRS 2005 IFRS 2006 IFRS 2006 2007 IFRS 2004 IFRS 2005 IFRS 2006 IFRS 2006 2007 IFRS Pro-forma Pro-forma Labour costs Marketing Other expenses Labour costs Other expenses As % of sales Source: Company reports Note: 1 Pro Forma assumes inclusion of Masterlek as part of Pharmstandard as of 1 January 2006 44

  45. Attractive Profitability Growth Net Profit 2004–2007 4 000 29% 3 500 24% 21% 3 000 18% 2 500 RUR mln 2 000 3 263 1 500 8% 2 036 2 006 1 000 1 019 500 320 0 2004 IFRS 2005 IFRS 2006 IFRS 2006 pro-forma 2007 IFRS Net Profit As % os sales 60% Net Profit growth in 2007 (IFRS) Source: Company reports Note: 1 Pro Forma assumes inclusion of Masterlek as part of Phamstandard as of 1 January 2006 45

  46. Consolidated Balance Sheet and Capex Capital Expenditure IFRS basis (in millions of RUR) 1 000 2004 2005 2006 2007 Cash and Equivalents 66 244 193 193 Other Current Assets 2 980 4 263 5 300 6 696 800 Long-term Assets 2 292 3 806 8 277 8 405 Total Assets 5 337 8 313 13 770 15 294 600 RUR, mln Total Debt 1 496 584 3 875 3 265 889 890 Current Liabilities (excl. short- 400 term debt) 931 3 303 2 425 1 129 687 Non-current Liabilities (excl. long-term debt) 378 502 1 129 1 297 200 Total Equity 2 533 3 925 6 340 9 603 189 Total Liabilities & Equity 5 337 8 313 13 770 15 294 0 2004 2005 2006 2007 CAPEX Debt summary CAPEX structure in 2007: 1. Purchase of property, plant and equipment 521.6 mln RUR (76%) 2. Purchase of intangible assets165.2 mln RUR(24%) • Facility A: US$80.9m (maturity Dec-2009/L+150) • Facility B: US$51.7m (maturity Dec-2011/L+190) • Net debt: US$125.1m Source: Company reports Note: 1 Conversion rate 25,57 RUR/USD 46

  47. Masterlek Integration • Leading Masterlek brands accelerated its sales growth under Pharmstandard management in 2007 (pro-forma): • Arbidol +56%; + 831 m RUR • Flucostat + 16%; + 68 m RUR • Amixin + 14%; + 29 m RUR • Improvement of Gross Margin due to decrease of API prices, transferring of production to own facility (Kursk): • Arbidol to 62% in 2007 vs 46% in 2006 • Flukostat to 86% in 2007 vs 58% in 2006 • Amixinto 75% in 2007 vs 45% in 2006 • Amixin production transfer on own facility (Tomsk) will be fully accomplished in 2008 • Integration of commercial and administrative operations decreased S&D and G&A costs by4% of sales • Realised estimated synergy effect Source: Company 47

  48. RUR Mln FY 2007 FY 2006 Change Sales 11 371 8 522 33,4% Gross Profit 6 852 4 942 38,6% S&D Expenses 1 626 1 268 28,2% S&D Expenses, % of Sales 14% 15% -1% G&A Expenses 571 499 14,4% G&A Expenses, % of Sales 5% 6% -1% Operating Income 4 614 2 967 55,5% Net Income 3 263 2 036 60,3% EBITDA* 4 882 3 255 50,0% 2007 Underlying Financials 48

  49. Appendix 49

  50. 8% 17% 25% 75% 83% 92% Generics Original Generics Original Generics Original Russian pharma market – generic market FRP Hospital Commercial Source: Pharmexpert preliminary data, retail prices 2007. Subject to change. 50

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