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 has been prepared solely for use in connection with the possible offering of ordinary shares (the “Shares”) and global depositary receipts representing shares (“GDRs” and, together with the Shares, the “Securities”) in the Company (the “Offering”). This document is an advertisement and not a prospectus and any purchase of Securities in the Offering should be made solely on the basis of information contained in the prospectus and any supplemental prospectus to be published in respect of the Offering. The information contained in this presentation has not been independently verified. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of Augment Investments Limited (the “Selling Shareholder”) or the Company or any of their respective affiliates, advisors or representatives shall have any liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with the presentation. 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 not for distribution in, nor does it constitute an offer of securities in the United States, Canada, Australia or Japan. Neither the presentation nor any copy of it may be transmitted into the United States, its territories or possessions, or distributed, directly or indirectly, in the United States, its territories or possessions. Any failure to comply with this restriction may constitute a violation of US securities laws. The presentation is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration. The Company has not registered and does not intend to register any portion of the Offering in the United States or to conduct a public offering of any securities in the United States. 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 is not a public offer or advertisement of Securities in the Russian Federation and is not an invitation to make offers to purchase any Securities in the Russian Federation, and must not be passed on to third parties or otherwise be made publicly available in Russia. The GDRs have not been and will not be registered in Russia and are not intended for “placement” or “circulation” in Russia. 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 forwardlooking 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. Citigroup Global Markets Limited and UBS Limited are acting for the Company and no one else in connection with the proposals referred to in the presentation and will not be responsible to any other person for providing the protections afforded to their client, or for providing advice in relation to such proposals. 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. 1
Roadshow Presentation
Today’s Presenting Team
2
Name
Title
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
Maxim Stetsuk
Head of IR/Financial Management
Roadshow Presentation
1. Company Overview Dr. Igor Krylov, CEO
Roadshow Presentation
Pharmstandard at a Glance § Leading domestic pharmaceutical company in Russia (measured by sales)
– #4 pharma company overall in Russia by sales value in 20061 – #2 pharma company in the commercial segment by sales value in 20061 § Industry leading growth and profitability § Market leading brands
– 5 brands among top-15 best selling domestic brands in Russia1 – Arbidol®, Pentalgin®, Complivit®, Terpincod®/Codelac®, Flucostat® § Acquired Masterlek in August 2006
– Added 30 products including 2 market-leading brands, Arbidol® and Flucostat® § Experienced sales force and modern and efficient manufacturing facilities
– 287 sales reps2, all with a medical background – Russian GMP compliant facilities, including lines at Kursk, some of which are EU GMP compliant Source: 1 2
4
Company Pharmexpert, preliminary data (subject to change), in wholesale prices As at 31 December 2006
Roadshow Presentation
Diversified Product Portfolio 1
Pharmaceuticals
Medical Devices
87% of 2006 sales
13% of 2006 sales
OTC 71% of 2006 sales
§ Therapeutic focus: Ø Analgesics Ø Cough & cold Ø Vitamins Ø Anti-viral Ø Anti-fungal
Source: Note:
Company 1 Pro forma 2006 sales, including Masterlek from 2 August 2006 2 Includes Other sales
5
Roadshow Presentation
Rx2 16% of 2006 sales
§ Product portfolio includes: Ø Acid pump inhibitors Ø Nitrites & nitrates Ø ACE inhibitors Ø Alimentary tract metabolism
§ Product portfolio includes: Ø Sterilisers Ø Distillers Ø Medical disposables
Investment Case Leading pharmaceutical company in the most rapidly growing pharma market Attractive industry fundamentals Portfolio of market leading brands Proven product development strategy Experienced sales force Modern and efficient manufacturing facilities Operational efficiency Experienced management team
6
Roadshow Presentation
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) as they arise
"Building a top-3 pharmaceutical company in Russia
7
Roadshow Presentation
2. Market Overview Dr. Olga Mednikova, Chief Sales and Marketing Officer
Roadshow Presentation
Russia—The World’s Fastest Growing Pharma Market (in retail prices, US$bn)
30
28% 24%
2006 growth rate (%)
25 20
17%
15
14% 8%
10
7%
7%
5
5%
5%
3%
2%
0 (5) (6%)
Russia
Brazil
China
Canada
Mexico
US
Spain
France
UK
Germany
Italy
Australia/NZ
Japan
(10)
Pharma market size (US$bn)
8.4
8.4
11.4
13.7
8.1
197.8
11.6
25.6
15.7
27.7
14.9
5.8
56.7
Population million)
142
187
1,315
33
108
340
45
61
60
83
58
25
128
(in
Source: DSM, EIU
"Russia was the fastest growing pharma market in 2005–2006 9
3%
Roadshow Presentation
Russian Pharma Market Set to Expand Pharmaceutical Consumption Per Capita in Russia($)
Consumption per capita ($)
80.00
70 58
60.00 40.00
38
33
27
44
§ Drug consumption per capita amongst lowest in Europe
20.00
§ Rapid market growth
0.00 2001
2002
2003
2004
2005
2006
Consumption per capita ($)
Pharmaceutical Consumption Per Capita by Country($)
214
230
200
165
194
150
142
171 111 119
100 50 Czech Republic
Slovakia
2005 Source:
10
47 50
38 49
Romania
Russia
0 Hungary
Pharmexpert, EIU Market Indicators
Roadshow Presentation
§ Russia was the fastest growing market globally in 2004-2006
300 250
expected to continue
Poland
2006
Russian Pharma Commercial Market Drivers
Strong macroeconomics driving consumer boom
Supportive demographic trends
Market Drivers
Increased consumer focus on health and well being
11
Roadshow Presentation
Affordability boosts access and consumption
Commercializatio n and development of distribution channels
A Leader in the Russian Commercial Segment Market Share—Top 10 Companies1 Pharmstandard 2 4.2% 2
Sanofi-Aventis 4.5%
Market Share—Top 10 Domestic Companies1
Berlin-Ch/Menarini 3.4%
Pfizer 3.0%
Pharmstandard 17.7%
Servier 2.9%
2
Nizhpharm (Stada) 5.0% Materia Medika 4.5%
Novartis 2.8% Gedeon Richter 2.8% Sandoz 2.6% Other 69.2%
Otechestvennie Lekarstva 3.4% Other 53.7%
Nycomed 2.6% Nizhpharm (Stada) 2.2%
Farm-Centr 2.1% Moshimfarmpreparaty 2.5%
"PHS is #2 in the US$5.3bn commercial segment (66% of the total market) Pharmexpert, preliminary data (subject to change)
Source: Notes: 1 Commercial segment 2006, based on sales in wholesale prices 2 Pro Forma assumes inclusion of Masterlek as part of Pharmstandard as of 1 January 2006
12
Roadshow Presentation
Microgene Npo 3.2% Krasnogorskleksredstva 2.6% Akrikhin (Polpharma) 2.7% Verofarm Zao 2.7%
Well Positioned to Capture FRP Upside § In 2006 FRP budget was set at RUR 29bn (RUR 70bn spent)1 § 2005 budget was set at RUR 51bn (RUR 46bn spent)1 § Resulted in a number of products being removed from the FRP list both voluntarily and Key facts
involuntarily by pharma companies as FRP officials ask for even longer payment terms and simultaneously cut prices
§ 17.1 million participants eligible—8.7 million currently enrolled21 § 2007 FRP budget is set at approximately RUR 35bn3
Current status
§ Short term solution: – Reallocating funds from prior and future years (~RUR 20bn) – Additional allocation of RUR 16bn § 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
Source: 1 2 3
13
Although FRP currently in adjustment mode, domestic pharma companies appear to be future beneficiaries RBC daily, 4 September 2006 Commersant (Russia) 6 March 2007 Pharmvestnik #2, 23 January 2007
Roadshow Presentation
Low Exposure to FRP 100 100
Composition of Leading Companies’ Sales in Russia by Market Segment in 2006
90 90
19 19
3 3
6 6
3 3 8 8
80 80 70 70
24 24
(%) (%)
16 16
15 15
15 15
10 10
10 10
75 75
75 75
Pfizer Pfizer
Nycomed Nycomed
62 62 89 89
40 40 57 57
20 20
76 76
26 26
Sanofi-Aventis Sanofi-Aventis
Novartis Novartis
Janssen-Cilag Janssen-Cilag
23 23 Pharmstandard Pharmstandard
Commercial Commercial
BerlinBerlinCh/Menarini Ch/Menarini
Servier Servier
FRP FRP
Roche Roche
Gedeon Richter Gedeon Richter
Hospital Hospital
ü Pharmstandard has a lower exposure to the FRP compared to its peers
Source:
Pharmexpert, preliminary data (subject to change)
Note:
Based on wholesale prices in US$
Roadshow Presentation
69 69
66 66
49 49
10 10
14
31 31
14 14
72 72
50 50
0 0
18 18
15 15
45 45
60 60
30 30
3 3
6 6
3. Product Portfolio/Pipeline Dr. Olga Mednikova, Chief Sales and Marketing Officer
Roadshow Presentation
Our Portfolio – Top 15 Pharmaceutical Products Product Terpincod®
ATC 2 Status therapeutic segment OTC Cough and cold
Arbidol®(1) Pentalgin — N®
OTC
Antiviral
OTC
Analgesics
586
796
35.8%
Complivit® (excluding Mama® and Active®)
OTC
Vitamins
394
545
38.5%
Pentalgin — ICN®
OTC
Analgesics
313
410
31.0%
Codelac®
OTC
Cough and cold
222
375
69.1%
Rx
6
254
NM
OTC
Antiviral Anti-fungal
0
197
NM
OTC
Psycholeptics
148
155
4.9%
Amixin® Askophen®
Rx
0
137
NM
OTC
Antiviral Analgesics
82
80
-2.4%
Validol®
OTC
Cardiac therapy
54
69
26.6%
Complivit Active®
OTC
Vitamins
46
68
48.9%
Oligovit®
OTC
Vitamins
57
60
5.2%
Citramon P®
OTC
Analgesics
41
51
2,923 1,751 4,674
5,390 1,936 7,326
26.6% 84.4% 10.6%
Phosphogliv® Flucostat® Corvalol®
(1)
(1)
Top-15 Pharmaceutical products Other Pharmaceutical products Pharmaceutical products total(2)
Source: Notes: 1 2
16
2005 Sales 2006 Sales (RURm) (RURm) Growth (%) 975 1,163 19.2% 0 1,032 NM
Company Sales only formed part of consolidated results from 2 August 2006 Total Pharmaceutical products sales include products categorised as Other
Roadshow Presentation
56.8%
Pharmstandard’s Leading Brands Leading domestic pharma trademarks by sales value in 2006 Ranking Trademark Arbidol 1 Mexidol Pentalgin
1 2 3
Sodium Chlorid Howthorn
4 5
Terpincod
6
Anaferon Viferon Phenotropil
7 8 9
Chondroxid Complivit
10 11
Cephazolin Flucostat 1
12 13
Essliver Glucose Biphidumbacterin
14 15 16
Impaza Corvalol
17 18
Proproten
19
Cyclopheron
20
Exclusively produced by Pharmstandard Produced by Pharmstandard Source: Pharmexpert. Based on consumer prices, Rx and OTC products Note: 1 Masterlek Brands
17
share
Roadshow Presentation
§ 5 leading brands § “Top of mind” position with consumers
§ Significant brand loyalty
Focused Sales and Marketing Efforts Sales force
Marketing / Advertising
§ 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 2007 looking to:
§ Promote products through TV, radio,
print media and internet as part of focus on brand building
§ Launched 5 new marketing campaigns since September 2006, including TV campaigns for Pentalgin®, Arbidol® and Flucostat®
– Increase to over 350 sales people
– Further specialise sales force by therapeutic area
§ Electronic Territory Management System (ETMS) system improving efficiency Arbidol® Print / TV campaign
Source: Note:
18
Company As of 31 December 2006
Roadshow Presentation
Significant sales and marketing capabilities
Pentalgin® Print / TV campaign
Arbidol®—#1 Pharma Brand in Russia Leading Products in Anti-infective Systemic Use Segment (2006)
Arbidol®
§ Captured #1 brand position, in part, through
Grippferon Aflubin (Frn-M Zao) (Richard 2.3% Bittner GmbH) Anaferon 4.2% (Materia Medika) 4.5% Amixin
active promotion by Pharmstandard sales force
§ Acquired as part of Masterlek transaction § Original product developed in 1987,
Annual Segment Sales Dynamics1,2 4.72
150
3.0
1.49
1.23
12.2 5.5
3.1 29.6
40.3
2001
2002
2.5
44.9
1.91
100
50
2.0 16.4 128.7
62.3
74.6
2003
2004
97.0
19
1.0
0.0
Other 1 2
1.5
0.5
0
Source:
3.5
Pharmstandard
2005
Average price (US$)
Company Source: Pharmexpert, 2006 preliminary data (subject to change) Based on consumer prices
Roadshow Presentation
2006
Average price (US$)
Sales (US$m)
4.0 82.9
3.03
Immunal (Sandoz) 7.3% Ocillococcinum (Laboratoire Boiron) 7.6%
5.0 4.5
3.89
200
Arbidol (Pharmstandard) 32.1%
Amixin (Pharmastanda (Pharmstandard) rd) 5.7% 5.7% Cycloferon (Polysan) 6.6%
active marketing launched in 2000
250
Other 6.3%
Source: Note:
Anaferon for Kids (Materia Medika) 9.8%
Pharmexpert (subject to change) Remodelled to reflect current categories
Viferon (Feron Ooo) 13.7%
Pentalgin—#1 Pain Reliever (Non-Narcotic) Top-10 Products in Analgesics Segment (2006)
Pentalgin
§ Looking to launch new (improved) formulation of Pentalgin in 2007 to capitalise on Pentalgin’s brand recognition § Franchise includes Pentalgin-N® and Pentalgin-ICN® § First launched Pentalgin-ICN® in 1999 and followed with launch of Pentalgin-N® in 2002 § Steadily gained market share since 2001 Annual Segment Sales Dynamics1,2 250 0.48
Sales (US$m)
0.20
0.32
0.25
0.26
23.8
24.1
54.7
0.3
30.8
16.5 50
73.5
99.6
102.8
100.8
2002
2003
2004
126.6
147.8
0.0 2001
Other 1 2
20
0.2 0.1
0
Source:
0.4
Pharmstandard
2005
Average price (US$)
Company Source: Pharmexpert, 2006 preliminary data (subject to change) Based on consumer prices
Roadshow Presentation
2006
Average price (US$)
150
100
0.5
0.42 57.6
Other 40.5%
Tempalgin (Sopharma) 8.0% Baralgin M (Sanofi-Aventis) 7.8%
Nurofen Plus (Reckitt Benckiser) 2.2%
Pentalgin-ICN (Pharmstandard) 7.8%
Sedal-M Sedalgin-Neo (Sopharma) (Actavis) Alka-Seltzer 5.9% Cardiomagnyl Solpadeine 3.4% (Bayer) (Nycomed) (GSK) 2.5% 2.7% 3.3%
0.6
200
Pentalgin-N (Pharmstandard) 15.8%
Source: Pharmexpert, preliminary data (subject to change)
Phosphogliv® – Successful Rx Product Launch Phosphogliv®
Top products in Hepatic Protectors segment (2006)
§ Launched in 2005 § Novel product in-licensed from the Institute of
Other 16.7%
Biomedical Chemistry § Premium priced product based on superior efficacy § Patent protected until 2018 § Clinically validated – 2nd generation combination therapy with anti-viral, anti-inflammatory and immunomodulating properties
Pharmstandard (Phosphogliv) 4.0%
Essentiale (Sanofi-Aventis) 29.8%
Carsil (Sopharma) 9.1% Essliver Forte (Stada) 9.6%
Heptral (Abbott) 19.3%
Annual segment sales dynamics1
Tycveol (EuropaBiopharm) 4.1%
Source: Pharmexpert, preliminary data (subject to change)
250
8.71
Sales (US$m)
6.79
7.8
5.82 150
4.49
3.83 100 50
0.9
0.6 51.0
5.06
1.2
6
2.5 1.5
187.0 126.7
67.6
78.0
88.4
2002
2003
2004
0 2001
Other Source:
21
4 2
0
1 2
8
Pharmstandard
2005
Average price (US$)
Company
Source: Pharmexpert, 2006 preliminary data (subject to change) Based on consumer prices
Roadshow Presentation
2006
Average price (US$)
200
10
Berlition 300 (BerlinCh/Menarini) 7.5%
PHS Recent Product Approvals and Launches
Product
Date of expected launch
ATC
ATC value, US$m (2006) 1
Key market brands
Rx
OTC
Recent product launches Maxicold®
Jan-07
Passifit®
Jan-07
Biosulin®
Nov-06
Artrosan®
Jan-07
Rastan®
Jan-07
R05A – cold preparations without anti-infectives N05B- hypnotics, sedatives
142
Coldrex, Fervex, Teraflu
125
Novo-Passit, Persen
A10C1+A10C2+A10C3 – human insulins and analogues M01A1 – anti-rheumatics, non-steroidal pain H04C0 – growth hormones
1622
Humulin, Protaphan, Actrapid
199
Movalis, Voltaren, Diclofenac
18
Genotropin, Saizen, Humatrope
Rx
OTC
Recent product approvals
Source: Note: 1 2
22
Complivit Ca D3®
May-07
A12A – calcium products
45
Calcium D3, Calcium
Benfolipen®
Jun-07
15
Milgamma, Neuromultivit
Combilipen®
Jun-07
25
Ondasol®
Jun-07
16
Milgamma, Thiamine Chloride Kytril, Zofran, Navoban
Carditrim®
Jul-07
111
Preductal
Immunex®
Sep-07
A11D (tablets) – vitamin B1 and combinations A11D (injections) – vitamin B1 and combinations A04A1 – serotonin antagonist antiemetics/antinauseants C01D0 – coronary therapy excluding calcium antagonists and nitrites L03A0 – immunostimulating agents excluding interferons
85
Immunal, Immunorm
Pharmexpert, preliminary data (subject to change) Russian segment size – retail audit Excludes regional tenders
Roadshow Presentation
Product Pipeline Near term pipeline Products in registration Number of registered Product applications Formulations trademarks
ATC1
OTC
Products in development
Vitamins Mineral supplements Wound healing agents Immunostimulating agents Analgesics Cough and cold preparations Total
Rx
8 3 1 1 2 2
4 2
11
17
9
1 1 1
Number of registered Product applications Formulations trademarks
ATC1
Functional gastro-intestinal disorder drugs Antiemetics and antinauseants Cholagogues and hepatic protectors Drugs used in diabetes Vitamins Cardiac therapy Agents acting on the renin-angiotensin system Hypolipidaemics/anti-atheroma preparations Topical corticosteroids Pituitary and hypothalamic hormones Immunostimulating agents Analgesics Psycholeptics Total prescription
 23
4 2 1 1 2 1
1 1 2 3 2 2 1 1 1 1 1 1 1 18
1 2 4 9 4 2 1 2 2 1 1 1 1 31
1 1 2 2 2 1 1
ATC1
Vitamins Analgesics Cough and cold preparations Laxatives Nonsteroidal products for inflammatory skin disorders Total
ATC2
8 1 1 1 1 12
Products
Immunostimulating agents Psychoanaleptics excluding anti-obesity preparations Pituitary and hypothalamic hormones Urologicals Anti-asthma and COPD products Antithrombotic agents
2 1 1 1 2 1
Total
8
1 1 1 1 14
Pipeline of OTC and Rx products supports Pharmstandard’s growth story
Roadshow Presentation
Products
4. Financial Overview Elena Arkhangelskaya, Chief Financial Officer
Roadshow Presentation
Rapidly Growing Revenue Profile
9,374
10,000
8,523
9,000 8,000
RUR millions
7,000
1,196 96 1,199
5,685
13%
14%
1,196 96
1%
1,331
14%
6,722
72%
14%
6,000 5,000
3,946
4,000
44 555
1% 14%
1,011 39 733
18%
13%
6,032
3,000 2,000
3,347
85%
3,902
71%
69%
1,000 0 2004 OTC
2005¹ Prescription
Other
2006² Medical Equipment
"Achieved 25% organic growth4 in 2006 Source: Company Note:
25
1%
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
4
Organic growth excludes sales by Masterlek (standalone Masterlek sales in 2006 RUR 2,283m and in 2005 RUR 1,362m, according to IFRS)
Roadshow Presentation
2006 PF³
Competitive Cost Structure General and Administration Costs
Selling and Distribution Costs 1,600
600
25%
549
1,372
522
1,400 1,069
14%
13.2%
499
500
1,268
20%
12%
433
1,200
10%
18.8% 14.6%
13.5%
15% RUR millions
RUR millions
400
14.9%
1,000
800
600
8% 7.8%
300
6%
10%
532
6.0%
5.9%
200 4%
400 5% 100
2%
200
0
0% 2004 Marketing & advertising
2005¹ Labour costs
2006²
2006 PF³
Other expenses
As % of Sales
Source: Company reports Note:
26
1
Tyumen consolidated as of 1 January 2005
2
Masterlek consolidated as of 2 August 2006
3
Pro Forma assumes inclusion of Masterlek as part of Pharmstandard as of 1 January 2006
Roadshow Presentation
0
0% 2004
2005¹ Labour costs
2006² Other expenses
2006 PF³ As % of Sales
Margin Expansion EBITDA
Gross Profit 6,000
70.0%
4,000
5,233 4,942
3,497
3,500
65.0%
5,000
50%
3,252
3,000
45%
40%
60.0% 3,178
38.2% 2,500
58.0%
55.9%
55.8%
55.0%
3,000 50.0% 2,000
RUR millions
RUR millions
4,000
37.3%
35%
1,720 2,000
30% 30.3%
1,500
25%
1,000
20%
1,726 45.0% 43.7%
583
1,000
40.0%
500
15% 14.8%
0
35.0% 2004
2005¹ Gross Profit
2006²
2006 PF³
Gross Margin (%)
Source: Company reports Note:
27
1
Tyumen consolidated as of 1 January 2005
2
Masterlek consolidated as of 2 August 2006
3
Pro Forma assumes inclusion of Masterlek as part of Pharmstandard as of 1 January 2006
Roadshow Presentation
0
10% 2004
2005¹ EBITDA
2006² EBITDA margin (%)
2006 PF³
Attractive Profitability Growth FY Net Profit 2004–2006 2,500
30% 2,036 23.9%
2,006
25%
2,000
21.4%
RUR millions
17.9%
20%
1,500 15% 1,019
1,000
500
8.1%
10%
320
5%
0
0% 2004
2005
1
Net Profit Source: Company reports Note:
28
1
Tyumen consolidated as of 1 January 2005
2
Masterlek consolidated as of 2 August 2006
3
Pro Forma assumes inclusion of Masterlek as part of Phamstandard as of 1 January 2006
Roadshow Presentation
2006 Net Margin
2
2006 PF
3
Logical Consolidator—Masterlek Acquisition Overview § Our business was built through several strategic transactions § Masterlek is the largest pharmaceutical transaction in Russia to date § Focused on anti-viral and anti-fungal therapeutic segments
– 3.5% market share among domestic producers by sales value in 20051 § Portfolio of 30 products:
– Leading brands include Arbidol® and Flucostat® § Arbidol’s complementary fit with the Pharmstandard cough & cold franchise § Significant cost savings anticipated through integration
Focused on pursuing attractive acquisition opportunities
Source: Note: 1
29
Company Pharmexpert
Roadshow Presentation
Consolidated Balance Sheet and Capex IFRS basis
Capital Expenditure 2005
2006
Cash and Equivalents
66
244
193
Other Current Assets
2,980
4,263
5,277
Long-term Assets
2,291
3,806
8,299
5,337
8,313
13,770
1,496
584
3,875
930
3,302
2,425
379
502
1,129
2,532
3,925
6,340
5,337
8,313
13,770
Total Assets Total Debt Current Liabilities (excl. shortterm debt) Non-current Liabilities (excl. long-term debt) Total Equity Total Liabilities & Equity
Debt summary § Facility A: US$91m (maturity Dec-2009/L+150) § Facility B: US$55m (maturity Dec-2011/L+190) § Net debt: US$140m
30
Roadshow Presentation
1,000 889
890
2005
2006
800
Capex (RURm)
2004
(in millions of RUR)
600
400
200
189
0 2004
Modern Production Facilities
Phytopharm Capacity: 48m Pharmstandard HQ
St. Petersburg – Facility Closed
Moscow Kursk
Nizhny Novgorod Tyumen Ufa
Leksredstva Capacity: 645m
31
Ufavita Capacity: 169m
Source:
Company
Note:
Capacity in packs. Figures shown are as of 31 December 2006
Roadshow Presentation
Tomsk
TZMOI
Tomskhimpharm Capacity: 208m
Core Comparables Benchmarking Gross margin (2006)
Sales growth (2006) 60%
80%
50%
60%
40% 30%
40%
20%
20%
10%
Veropharm
Zentiva Zentiva
30%
Veropharm
30%
Stada
40%
Stada
Net profit margin (2006)
Krka
EBITDA margin (2006)
Krka
Hikma
Gedeon Richter
Egis
Aspen
Actavis
Pharmstandard
Zentiva
Veropharm
Stada
Krka
Hikma
Gedeon Richter
Egis
Actavis
Aspen
0% Pharmstandard
0%
20%
20% 10%
10%
Hikma
Gedeon Richter
Egis
Aspen
Actavis
Pharmstandard
Zentiva
Veropharm
Stada
Krka
Hikma
Gedeon Richter
Egis
Aspen
Actavis
0%
Pharmstandard
0%
Source: Company reports. Veropharm figures based on equity research as 2006 results not available
"PHS has industry leading growth and profitability 32
Roadshow Presentation
5. Concluding Remarks Dr. Igor Krylov, CEO
Roadshow Presentation
Investment Case Leading pharmaceutical company in the most rapidly growing pharma market Attractive industry fundamentals Portfolio of market leading brands Proven product development strategy Experienced sales force Modern and efficient manufacturing facilities Operational efficiency Experienced management team
34
Roadshow Presentation
Transaction Highlights
35
Issuer
§ OJSC “Pharmstandard,” an open joint stock company incorporated under the laws of the Russian Federation
Securities offered
§ Ordinary shares and GDRs of Pharmstandard § 100% secondary shares § 15% over-allotment option on GDRs
Selling shareholder
§ Augment Investments Ltd.
Offering structure
§ Institutional investors - Shares and GDRs: In the US under Rule 144A to Qualified Institutional Buyers (QIBs) Outside US and Russia pursuant to Reg S - Shares Russia § 4 GDRs will represent 1 share
Price Range
§ $11.55 – $14.55 per GDR § $46.20 – $58.20 per share
Timing
§ Pricing: expected on 3 May § Closing: expected on 10 May 2007
Lockup
§ 180 days for the Issuer and Augment Investments Ltd.
Listing locations
§ Ordinary shares listed on MICEX and RTS § GDRs listed on LSE
Joint bookrunners and global co-ordinators
§ Citi and UBS
Roadshow Presentation
Appendix
Roadshow Presentation
Competitive Landscape – Total Market Market Share of Top-10 Companies in the Russian Pharmaceutical Market (% 2006 value)1
Market Share of Domestic Pharmaceutical Producers (% 2006 value)1
Janssen-Cilag Sanofi-Aventis Novartis 3.2% Pharmstandard 2 3.8% 5.2% 3.1%
Pharmstandard 2 15.3%
Nizhpharm (Stada) 5.0%
Berlin-Ch/Menarini 3.0% Servier 2.9% Roche
Otechestvennie Lekarstva 4.6% Farm-Centr 3.8%
2.8% Gedeon Richter 2.6% Other 68.7%
Other 53.3%
Microgene Npo 3.5% Materia Medika 3.5%
Pfizer 2.6% Nycomed 2.3%
Moshimfarmpreparaty 2.4%
Biotek 2.5%
Verofarm Zao Akrikhin 3.2% (Polpharma) 3.0%
"#4 pharma company in Russia overall "#1 domestic pharma company – more than 3 times the size of the #2 domestic player Source: Pharmexpert, preliminary data (subject to change) Notes: 1 Based on sales in wholesale prices 2 Pro Forma assumes inclusion of Masterlek as part of Pharmstandard as of 1 January 2006
37
Roadshow Presentation
Growth Analysis Across Market Segments1 Sales 2005
Company (in US$000s)
Domestic companies
Pharmstandard
(2)
International companies 2
38
Hospital
Commercial
FRP
Hospital
Commercial
Total Sales 2006
Total Growth
Commercial Growth
Total Growth (%)
Commercial Growth (%)
14,106
4,848
169,787
19,287
6,959
214,296
188,741
240,541
51,800
44,509
27%
26%
13,175
1,224
49,249
16,078
825
62,549
63,648
79,452
15,804
13,300
25%
27%
Otechestvennie Lekarstva
13,121
9,105
33,847
18,644
12,979
41,140
56,073
72,763
16,689
7,292
30%
22%
4,971
18,330
20,213
8,456
24,997
25,709
43,514
59,159
15,645
5,493
36%
27%
18
18,521
31,742
0
16,728
38,904
50,281
55,632
5,351
7,162
11%
23%
Verofarm
7,964
5,739
25,588
6,080
11,465
32,235
39,290
49,779
10,489
6,647
27%
26%
Akrikhin
9,555
3,482
31,822
11,789
3,167
32,418
44,859
47,375
2,515
596
6%
2%
Biotek
1,363
7,933
26,067
3,371
11,553
24,671
35,362
39,595
4,233
(1,396)
12%
(5%)
Moshimfarmpreparaty
1,874
6,249
33,871
1,052
5,910
30,180
41,993
37,142
(4,851)
(3,691)
(12%)
(11%)
18,420
13,215
21,775
5,903
8,434
20,071
53,410
34,407
(19,003)
(1,704)
(36%)
(8%)
Farm-Centr Microgene
Sanofi-Aventis
78,234
58,894
199,556
97,095
76,280
299,804
336,684
403,179
66,496
30,248
20%
15%
Novartis
46,875
13,937
111,186
133,174
17,659
145,921
171,998
296,754
124,756
34,734
73%
31%
Janssen-Cilag
23,183
7,270
52,435
177,110
7,260
63,161
82,887
247,531
164,644
10,725
199%
20%
14,106
4,848
169,787
19,287
6,959
214,296
188,741
240,541
51,800
44,509
27%
26%
Berlin-Ch/Menarini
40,236
10,635
157,748
42,196
14,315
176,159
208,619
232,671
24,052
18,412
12%
12%
Servier
50,958
5,558
102,604
68,910
7,150
148,570
159,120
224,629
65,509
45,966
41%
45%
Roche
44,560
18,568
35,853
137,530
32,936
50,004
98,981
220,470
121,489
14,151
123%
39%
Gedeon Richter
40,936
24,419
104,756
33,535
29,321
142,626
170,111
205,482
35,371
37,870
21%
36%
Pfizer
26,652
24,608
124,690
20,351
30,095
152,634
174,950
203,080
28,130
27,945
16%
22%
Nycomed
17,758
18,769
107,807
17,769
27,476
134,068
144,335
179,313
34,979
26,261
24%
24%
Pharmstandard
(2)
"Pharmstandard is growing in-line with its peers in the commercial segment
Pharmexpert, 2006 preliminary data (subject to change)
Note: 1
FRP
Total Sales 2005
Stada Arzneimittel Ag
Brinzalov A
Source:
Sales 2006
Based on sales in wholesale prices Includes Masterlek with respect to 2006
Roadshow Presentation
Pharmstandard Key Development Milestones Leksredstva plant (Kursk) 4Q03:
2Q04:
3Q05:
May 2006:
3Q06:
4Q06:
Acquisition of ICN’s business in Russia (five factories, distribution centres and pharmacy chain)
Close Polypharm (pharma production facility)
Sale of Marbiopharm (pharma production facility)
Legal name changed from Biovit LLC to OJSC Pharmstandard
Acquisition of Masterlek (3.5% share of domestic Russian Pharma market by sales value)
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 manufacturing facilities 2003 (Ufa and Phytopharm) operating under Biovit LLC
39
2004
2005
2006
2007
Q104:
Jan 05:
1H05:
End 2005:
2H06:
1H06:
New management team brought in with experience in international and domestic pharma companies
Acquisition of TZMOI (Tyumen)— manufacturer of medical equipment
Open centralised warehouse for pharmaceutical products in Moscow
Creation of holding company/ legal restructuring finalised
Termination of production in Oktyabr plant in St Petersburg, production transferred to other existing sites
New production of solutions, production of vitamins and insulin
Source:
Company
Note:
OJSC – Open Joint Stock Company, LLC – Limited Liability Company
Roadshow Presentation
Total investment since 2004: approximately RUR 730m
2007: New production workshops for Rastan® and Phosphogliv®
Ufavita plant (Ufa)
Medical Equipment (TZMOI) Medical Equipment (2006 sales RUR 1,196m)1, 14% of group sales in 2006
Sterilizers (45% of 2006 sales)2
Aqua distillers (8% of 2006 sales)2
§ Market size approximately
§ Market size approximately
§ Market size of syringes
§ Market leader with estimated
§ TZMOI market share
§ TZMOI market share
RUR700m
56% market share by sales value
RUR190m
estimated at 24%
§ Growth driven by the Priority National Health Project encouraging investment in new equipment
Source:
Company estimates
Note:
40
Disposables/Other (47% of 2006 sales)2
1
Represents Pro Forma figures which assumes inclusion of Masterlek as part of Phamstandard as of 1 January 2006
2
Based on divisional sales
Roadshow Presentation
approximately RUR3,000m about 20%
§ Portfolio includes syringes,
urology bags and catheters
Pro Forma Pharma Portfolio by Therapeutic Segment Pro Forma1 sales split as at 2006 A02-Antacids, Antiflatulents and Anti-Ulcerants 0.7%
C09-Agents Acting on the ReninAngiotensin System 0.7%
Other Sales 8.3%
J01-Systemic Antibacterial 0.9% R05-Cough and Cold Preparations 19.9%
R02-Throat Preparations 1.0% V03-All Other Therapeutic Products 1.2% N06-Psychoanaleptics Excluding Anti-Obesity Preparations 1.5%
J05-Antivirals for Systemic Use 18.5%
C01-Cardiac Therapy 2.3% L03-Immunostimulating Agents 2.7% N05-Psycholeptics 3.5% A05-Cholagogues and Hepatic Protectors 3.6% J02-Systemic Agents for Fungal Infections 5.7% Source:
41
N02-Analgesics 17.4%
Company
Note: 1
A11-Vitamins 11.9%
Pro Forma assumes inclusion of Masterlek as part of Pharmstandard as of 1 January 2006
Roadshow Presentation
Pro Forma sales = RUR 8,053 million (2006) OTC = 83% / Rx = 17%
Sales Team HQ Sales and marketing
§ All sales reps have medical
pharma market
§ Incentivised sales force—up to 33% bonus of annual salary
§ In 2007 looking to:
– Increase “feet on the street” to over 350 sales people
OTC
Rx (incl. ENDO-Team)
National manager 1 manager
National manager 2 managers
Regional manager 8 managers
Regional manager 12 managers
OTC sales force (117 medical reps)
Rx sales force (147 medical reps)
– Further specialise sales force by therapeutic area
Experienced sales force Source: Note:
42
Company As of 31 December 2006
Roadshow Presentation
Real time data - ETMS
§ Covers 75% of the Russian
Real time data - ETMS
education/work experience
Breakdown of Sales for 2006 by Distributor Top 5 Distributors – 2006
§ Top 5 distributors accounted for 51% of
commercial pharmaceutical product sales in 2006
Distributor
§ Typical payment terms for distributors:
– Regional and export distributors: 30–60 days
– National distributors: 60–90 days – FRP program: 180 days
Genesis
17
Protek
13
SIA International
11
Katren
5
Infarma Pro
5
Total
Source: Note:
43
Roadshow Presentation
% of sales
Company Manufacturers’ prices
51
Production Facilities – Summary Overview Approximate size (sq. m.)
Factory
Source: Note:
44
52,644 361,077
52,644 564,406 10,368 1,260 16,200
5,850 (lease)
Ampules Frozen-dried preparation Syrops & liquid forms Tablets Vitamin bars (ferrohematogen) Insulin Saline infusin
2 3 1 2 2 2 2
7,624 2,640 6,360 63,012 14,000
8,595 2,640 6,360 109,973 22,680 14,400 4,500
1,200 (lease)
Ointments Powders Syrops & liquid forms Tablets
2 1 2 2
11,100 10,280 29,187 12,850
1,200 10,280 24,000 12,850
29,000 (own)
Syrops & liquid forms Tablets
1 3
1,200 206,856
1,200 206,856
Closed in 2006
Capsules Sprays Tablets
2 1 2
1,384 4,582 72,797 857,593
1,070,412
295 624 24,250 319 7,320
295 624 24,250 319 7,320
Syringes Needles Sterilizing machines < 100 L Sterilizing machines > 100 L Aquadistilling machines
Company. Total capacity for pharmaceutical production in 2006 excludes capacity from Oktyabr factory (St. Petersburg) which closed in Q3 2006 Total capacity calculations assume 8-hour shifts and 7 day working week
Roadshow Presentation
Capacity 000’s packs Dec 2006
3 3 2 2 3
PHYTOFARM (N.NOVGOROD)
TZMOI (Tyumen)
Capacity 000’s packs Dec 2005
Syrops & liquid forms Tablets Sprays Powders Capsules
UFAVITA (UFA)
OKTYABR (S.PETERSBURG)
Shifts
14,900 (lease) LEKSREDSTVA (KURSK)
TOMSKHIMPHARM (TOMSK)
Formulation
2 2 2 2 2
Complivit—#1 Vitamin Franchise Top-10 Products in Vitamin Segment (2006)
Complivit and its sub-brands
§ Looking to launch 2 new products under this
Complivit (Pharmstandard) 11.5% Vitrum (Unipharm) 6.6% Supradyn (Bayer) 4.8% Centrum (Wyeth-Whitehall) 4.6%
brand umbrella by the end of 2007
§ Brand umbrella includes Complivit®, ComplivitActive® and Complivit “mama”®
§ First launched Complivit in 1986 and followed on Complivit-Active®
with by the end of 2004
and Complivit
“mama”®
Other 53.0%
Annual Segment Sales Dynamics1,2 250
7
Sales (US$m)
150
4.04
4.43
3.41 100 50
14.7 63.1
16.7 81.2
18.5 91.0
4.98
5.39 26.8
5.88 27.6
19.3 102.5
Other
45
4
136.4
148.1
2 1 0
2001
1 2
5
3
0
Source:
6
2002
2003
2004
Pharmstandard
2005
Company Source: Pharmexpert, 2006 preliminary data (subject to change) Based on consumer prices
Roadshow Presentation
2006
Average price (US$)
Average price (US$)
200
Source:
Merz Spezial Dragees (Merz) 3.8% Elevit Pronatal (Bayer) 3.8% Biovital Gel for Children (Bayer) 3.4% Vitrum Prenatal Forte (Unipharm) 3.2% Vitrum Beauty (Unipharm) 2.9% Vitrum Vision (Unipharm) 2.4%
Pharmexpert, preliminary data (subject to change)
Terpincod®/Codelac®—#1 Cough and Cold Franchise Top-10 Products of Antitussive & Expectorants Segment (2006)
Terpincod®
§ First launched Terpincod® in 1996 § Non-promoted brand with high margins
Terpincod (Pharmstandard) 14.3%
Codelac®
§ Includes Codelac® tablets and Codelac Phyto®
Other 41.0%
syrup
§ First launched Codelac® tablets in 1996 and followed with Codelac
Phyto®
Ascoril Expectorant (Glenmark) 3.0% Hedelix Syrup Cough Control (Krewel Meuselbach) 3.2%
Annual Segment Sales Dynamics1,2 250
1.22 1.02 0.67
150 100
0.52 13.6
0.46 8.4
50 63.9
87.8
26.2
0.83
46.3
0.8
35.2
0.6 114.0
121.2
156.1
176.2
2002
Other
46
0.4 0.2 0.0
2001
1 2
1.2 1.0
40.1
0
Source:
1.4
2003
2004
Pharmstandard
2005
Average price (US$)
Company Source: Pharmexpert, 2006 preliminary data (subject to change) Based on consumer prices
Roadshow Presentation
2006
Average price (US$)
Sales (US$m)
200
Ambrobene (Ratiopharm) 6.5% Doktor Mom (Unique Pharmaceutical) 5.3% Codelac (Pharmstandard) 5.3%
Bromhexine 8 Berline-Chemie (Berlin-Ch/Menarini) 2.9%
syrup in 2004
Source: Note:
Lasolvan (Boehringer Ingelheim) 10.6%
ACC (Sandoz) 3.3%
Pharmexpert, preliminary data (subject to change) Based on consumer prices
Pulmozyme (Roche) 4.5%
Maxicold® Case Study May 2004 Stage 1 Marketing request Jun-Aug 2004 Stage 2 Internal expertise for production and technology, availability of active ingredients Aug 2004 Stage 3 Project management, approval by GM Sep-Dec 2004 Stage 4 Development of production and Regulatory filing
§ In-depth analysis of potential cough/cold drug development opportunities
§ Marketing/medical review of compounds/possible compositions
§ Review of production capability and capacity § Agreed PHS-Leksredstva was to be production location
§ Production team put together (technologist,
registration mgr., procurement mgr.), project approved by GM
§ § § §
Experimental / production equipment tests Production development Pre-clinical studies Development of regulatory file
§ 1st submission to Ministry of Health: 28-Jan-05 § 2nd submission (Pharmaceutical and Pharmacological Jan 2005-Jul 2005 Stage 5 Milestones of Regulatory stage
Source:
47
Company
Roadshow Presentation
Committees): 10-Mar-05
§ § § §
Clinical review completed: 19-Jul-05 Labelling approved: 07-Dec-05 Registration certification received: 26-Feb-06 License for production received: 27-Jul-06
Passifit® Case Study § Production started in July 2006 § First commercial sales commenced in September 2006
– Line extensions include new formulations e.g. tabs and pediatric § Actively promoted in January 2007
– Specialist doctors (e.g. gynecologists), general practitioners and pharmacists
§ Priced at a discount to key competitor product Novo-Passit § Growth expected to be achieved through increasing market share Source:
48
Company
Roadshow Presentation
Complivit Calcium D3® Case Study October 2004 Stage 1
§ Marketing request
Nov-Dec 2004 Stage 2
§ Internal expertise for
January 2005 Stage 3
§ Project management, approval
Jan-Feb 2005 Stage 4
§ Development of production and
by GM
regulatory filing
March 2005 Stage 5
§ Submitted to Ministry
January 2007 Stage 6
§ Registration approved
April 2007 Stage 7
49
production and technology, availability of active ingredients
Roadshow Presentation
of Health
§ Production
50
Roadshow Presentation