OREANDA-NEWS. OJSC Pharmsynthez (Leningrad region, MICEX: LIFE) (“Pharmsynthez” or “the Company”), the leading Russian biopharmaceutical company that specializes in the development, manufacture and distribution of pharmaceuticals, has today published its consolidated audited results for the full year period ending 31 December 2012, in line with US GAAP. The results were compiled by leading global auditor, Ernst & Young.

Highlights

Consolidated sales of USD 8.5million (2011: USD 6.7 million)

Revenue of USD 12.7 million in 2012 inclusive of Government co-financing of R&D

Consolidated gross profit USD 4.7 million (2011: USD 3.7 million)

Stable gross margin at 55%

EBITDA loss of USD 0.4 million (2011: USD 0.4 million) due to the strategic goal to increase R&D expenditures, exceeding the amount of Government co-financing

Virexxa Phase II clinical trial planned to begin in the US and EU in the third quarter of 2013

Myeloxen Phase IIa clinical research ongoing with results expected in the fourth quarter

Pulmoxen Phase I trial to begin during the third quarter

Dmitry Genkin, Chairman of Pharmsynthez, commented, “These positive operating indicators, including the growth in revenue, were achieved mainly thanks to the successive realization of plans to expand into the pharmaceutical markets of the Former Soviet Union and wider international markets. This has been key strategic objective of the Board and we are confident this will help deliver further growth and value for shareholders.”

Financial Review

The growth in consolidated revenue from operations in 2012, as noted above, amounted to USD 1.8 million, up 27% from 2011. Sales by volume in the Russian Federation increased 6%, while in Ukraine they grew 3.2 times and 1.9 times in Estonia. Together with income from fulfilling R&D contracts financed by the Russian Ministry of Industry and Trade, the Company’s revenue totaled USD 12.7 million.

Consolidated gross profit for 2012 amounted to USD 4.7 million, up 26% or USD 1 million from 2011. Meanwhile the gross margin remained almost unchanged at 55%.

In total for 2012 the Company posted a total of USD 88,000 of comprehensive income in total versus a loss of USD 1.2 million the previous year.

Pharmsynthez’s commercial and management expenses grew 21% from the previous year and amounted to USD 4.8 million mainly due to salary expenses growth. Furthermore, the Company boosted its operational effectiveness by reducing the share of management expenses in revenue from 36% to 34%.

For 2012 the Company posted a USD 0.4 million loss on EBITDA versus a USD 0.4 million profit last year. The main reason for the decline in this indicator was reduced Government co-financing on R&D carried out under contracts with Russia’s Ministry of Industry and Trade. In 2012 R&D expenditures significantly exceeded the amount of government co-financing as a result of the company’s plans for independent development going forward.

The effect of other operating income in 2012 was minimal compared to 2011, when the Company posted USD 0.9 million in income from the revaluation of a land plot. Meanwhile, other operating expenses significantly increased to USD 0.9 million, and their main components, according to the rules for US GAAP in 2012 were USD 0.3 million in losses from FOREX changes, USD 0.1 million from property taxes, and USD 0.3 million from provision allocations.

The Company’s shareholder capital corresponding to its consolidated balance increased in 2012 by USD 2 million to USD 22.5 million. It should also be noted that in 2012 Pharmsynthez issued 2,605,067 ordinary shares at a nominal price of five rubles per share (USD 0.16 at 31.12.2012 exchange rate). Furthermore, 2,605,000 shares were swapped with Sympatica Pharmaceuticals Limited for a 100% stake in LifeBio Laboratories Limited. 67 shares were acquired by third parties.

At its Annual General Meeting of shareholders in June, the Company confirmed Ernst & Young as the auditor for OJSC Pharmsynthez for 2013. Pharmsynthez publishes US GAAP accounts to increase operational transparency.