OREANDA-NEWS. Pharmstandard OJSC (LSE: PHST IL, RTS: PHST RU) (further "Pharmstandard" or the "Company") announces its unaudited 9M/Q3 2014 sales results.

On April 1, 2014 OTCPharm PJSC (further "OTCPharm"), OTC business that was spun-off from Pharmstandard OJSC, started independent operating activities.

As of Q2 2014 OTCPharm sales are no longer included into Pharmstandard sales and will be recognized in OTCPharm statements.

Sales highlights.

Organic pharmaceutical sales excl. OTCPharm portfolio (27 brands)in FY2013 and Q1 2014 demonstrated 16% growth in 9m2014

9M 2014 Pharmstandard sales reached RUR24 760m demonstrating RUR3 806m or -13% y/y decline, compared to RUR28 567m in 9M 2013. This decline is attributed primarily to OTCPharm spin-off and TPP segment decline in sales

Pharmaceutical products and medical equipment accounted for 74% and 2% of the Company's total sales in 9M 2014, respectively. 9% of total sales is attributed to Services to third parties including agency fees and contract manufacturing (further "CMO"). 15% of total sales is attributed to sale of finished goods and raw materials to OTCPharm as a result of the spin-off.

In Q3 2014 Pharmstandard sales reached RUR7 537m falling 39% y/y (RUR1 750m), compared to RUR12 400m in Q3 2013. The main reason for decline (- RUR4.5bn/-85%) is attributed to the spin-off effect.

Pharmaceutical products. Sales results.

Pharmaceutical sales in 9M 2014 reached RUR18 286m (-RUR9 602m/-35%), with organic sales accounting for 49%, TPP for 46% and API for 5% in the pharmaceutical sales mix. This change is mainly attributed OTC products (-63%) with majority of them being moved to OTCPharm and TPP products (-21%)

Organic pharmaceutical sales in 9M 2014 amounted to RUR8 984m (-45%) vs RUR16 462m in 9M 2013. The structure of sales changed as a result of the spin-off with 49% accounted for by OTC products and 51% by Rx products.

Organic prescription product (Rx) sales in 9M 2014 reached RUR4 566m (+RUR23m/+0.5%). Key growth drivers remain unchanged: Phosphoglive®, Combilipen® and Octolipen® (+RUR417 in total). A significant effect (-RUR236m) was caused by relocation of Rx forms of Pentalgin, Codelac and Termicon to OTCPharm portfolio and revenue as of Q2 2014.

Organic over-the-counter (ОТС) product sales in 9M 2014 reached RUR4 419m (-63%). The majority of OTC products was moved to OTCPharm portfolio with the revenue being recognized in OTCPharm independent statements.

Spin-off effect. In April 2014, to launch operating activities of OTCPharm, all finished goods of OTC products and raw materials for manufacturing of these products were sold to OTCPharm by the Group at the amount of RUR3 596m. Additional sum of RUR187m stands for these items in Q3 2014. The total amount of revenue for this segment stands at RUR3 783m.

Services to third parties. The Company provides services to third parties which were reclassified to regular revenue in 2014. These services include contract manufacturing and agency contracts with OTCPharm. This part of company revenue amounted to RUR2 180m as of 9M2014.

Contact Manufacturing. The Company's subsidiaries provide services for the manufacturing of certain products from the raw materials owned by customers. Since 2014, the management of the Group is classified contractual manufacturing as a regular revenue. Thereof, Pharmstandard reclassified income from contractual manufacturing accounted previously on net basis from other income to revenue.

Agency Fees. The Company holds agency contracts with related parties for distribution and sales of certain products. Since 2014, the management of the Group classified agency fee income as a regular revenue. Thereof, Pharmstandard reclassified agency fee income from other income to revenue and for the purpose of comparative analysis, the prior year figures were restated accordingly.

TPP sales in 9M 2014 added up to RUR8 487m (-21%) (vs RUR10 678m in 9M 2013).

Government procurement. 7 Nosologies Federal Program.

Government procurement segment reached RUR4 494m in 9M 2014 (-17%/-RUR906) with Mabthera®, Coagil®, Infibeta® and Velcade® declining for the total sum of RUR1.3bn y/y due to relocation of auctions.