OREANDA-NEWS. February 15, 2012. Pharmstandard JSC (LSE: PHST IL, MICEX\RTS (main):PHST, MICEX\RTS (classica): PHST ) announces unaudited consolidated sales results according to IFRS for 2011.

2011 Key Highlights

In 2011 Pharmstandard's sales enjoyed a steady growth increasing by 43.7%, or RUR 12,968.9 million, and amounted to RUR 42,655.5 million vs. RUR 29,686.6 million in 2010.[1]

As in the previous year, Arbidol remains the best performing brand on pharmaceutical market in Russia.[2] Sales of Arbidol in 2011 amounted to RUR 4,011 million, a reduction of 28.2% or RUR 1,579 million vs. RUR 5,589 million in 2010. A reduction in consumption of Antiviral and immunomodulatory products was a common feature for all the players of the pharmaceutical market in Russia, without exception. It is worth mentioning that the Arbidol CAGR shown more than 30% (2005-2011).

Simulation of Company's organic sales[3] excluding Arbidol indicates that the Company's revenue from sales of pharmaceutical products in 2011 would have been RUR 15,613.4 representing an increase of 15% (RUR 2,044.5 million) in relation to the previous year (RUR 13,572.9 million). Organic sales[4] of Company's products including Arbidol sales amounted to RUR 19,624.2 million, an increase of 2.4% (RUR 461.9 million).

Revenue from sales of Vital and Essential Products amounted to RUR 24,190.5 million or 57.4% of the total revenue of the Company in 2011.

Sales of Third Party Products (TPP) in 2011 increased by 119.6% or RUR 11,832.1 million totalling RUR 21,726.0 million. The share of TPP in overall 2011 sales was 51.6% (33.3% in 2010). The Company supplied 23,532 thousand packs of TPP; in 2011, the increase in volume terms amounted to 116.1% or 12,664.1 thousand packs vs. the 2010 figures (10,887.9 packs).

Revenue of Phramstandard-Biolek PJSC in 2011 totalled RUR 543,4 million. The Company's Management views this as a positive development, in line with the expectations regarding performance of the company one year after the announcement about the purchase of 55% of Biolek PJSC (Ukraine) shares in January 2011.

Sales of medical equipment in 2011 amounted to RUR 763.6 million, a considerable increase (21% or RUR 133.1 million) vs. the same period a year ago. The overall increase in the segment of medical equipment resulted primarily from the expansion of the line of products sold through Pharmstandard-Medtechnika LLC, a joint venture set up for sales of medical equipment.

The Pharmaceutical Market in Russia. Results of 2011.

In 2011 Pharmstandard was in the third position among the TOP10 pharmaceutical corporation in Russia[5].

Pharmstandard came 27 in the TOP-100 of the most dynamic consumer goods companies, according to the rating of the Kommersant Secret Firmi Magazine. 178 consumer goods companies participated in the survey; each of them has been in business for at least three years and is one of the five leading companies in its market.[6]

The value of the Russian pharmaceutical retail sector in 2011 was RUR 462,3 million, an increase of 14.2% or RUR 57.5 million vs. the 2010 figures. The volume of the retail sector in 2011 amounted to 4,53 billion packs, representing an increase of 3% vs. the 2010 figures (4,39 billion packs). It is worth noting that this growth rate is significantly lower than that for 2010/2009 (+11%). Apart from that, the total growth in volume terms for 2011/2010 (+137 million packs) is three times lower than the growth figures for 2010/2009.[7]

In 2011, the Rx segment grew by 18% in value terms and by 8% in volume terms in relation to the figures for the previous year.

OTC segment increased by 11% in value terms and by 1% in volume terms.?

For this reason, it is possible to say that the Rx segment was the growth driver in 2011 (60% of the growth structure in value terms vs. 50% in 2010). The share of the Rx products in value terms amounted to 50% (in 2010 it was 48%). [8]

Our analysis of the Pharmexpert database shows that the Vital and Essential Products segment of the Russian pharmaceutical market in 2011 increased by 12%, a more significant growth in comparison to 2% in 2010/2009. The growth in volume terms in the period from 2011 to 2010 was 7 times higher in relation to the corresponding figures for the period from 2010 to 2009.

In 2011, the share of the Vital and Essential Products segment was 35% in value terms and 39% in volume terms. Apart from that, the Vital and Essential Products segment enjoyed a much higher rate of growth in comparison with the products not included in the list of Vital and Essential Products, namely +7% vs. +1%. This leads us to the conclusion that the Vital and Essential Products segment is becoming the driver of growth in volume terms: 85% of the growth structure (+114 million packs of the total number of 137 million packs); while in 2010/2009 the share of Vital and Essential Products in the growth structure amounted to no more than 38%.

Rx products are the growth drivers within the Vital and Essential Products segment; their increase in 2011 vs. 2010 amounted to 14% in value terms and 10% in volume terms.

Pharmstandard's sales results in 2011.[9]

According to the non-audited results (IFRS), the Company's revenue in 2011 grew by 41.9% and amounted to RUR 42,113.8 million, an increase of RUR 12,427.2 million vs. RUR 29,686.6 million a year earlier. The share of sales of pharmaceutical products in the Company's overall revenue amounted to 98.2%. In the overall sales structure, organic sales comprise 45.7%, Third Party Products (TPP) account for 51.6% and other products for 0.9%. Pharmstandard's revenue from sales of medical equipment amounted to 1.8% of Company's total sales.

Sales of pharmaceutical products (including Third Party Products) amounted to 42.3% or RUR 12,294.1 million; total sales amounted to RUR 41,350.2 million.

Organic sales (excluding TPP) amounted to 2.4% or RUR 461.9 million; total sales amounted to RUR 19,624.2 million.

Slowing down of the rate of organic sales has been caused primarily by lower sales of Arbidol due to the stable epidemiological situation during 2011 which lead to a reduced consumption of Antiviral and immunomodulatory products. This was a tendency common for all participants of the Russian pharmaceutical market, without exception.

It is worth mentioning that a simulation of Company's sales excluding Arbidol indicates that the Company's organic revenue from sales of pharmaceutical products in 2011 would have been RUR 15,613.4 representing an increase of 15% (RUR 2,044.5 million) in relation to the previous year (RUR 13,572.9 million).

Sales increase of Third Party Products amounted to 119.6% or RUR 11,832.1 million. Their total sales amounted to RUR 21,726 million.

Rx products (Company's organic sales of [10])

In 2011, Pharmstandard enjoyed great sales results in the segment of Rx products which have won trust of the inhabitants of Russia due to their outstanding quality. Revenue from sales of Rx products amounted to RUR 3,798.2 million and increased by RUR 504 million or 15.3% vs. RUR 3,294.2 million in 2010.