OTCPharm PJSC reports FY2014 Audited IFRS Results

Moscow, 30 April 2015 – OTCPharm PJSC (RTS: OTCP) (“OTCPharm” and/or the “Company”) reports its Audited IFRS Results for the year ended 31 December 2014.

In April 2014, OTCPharm OJSC (since 10 December 2014 – OTCPharm PJSC), created as a result of Pharmstandard OJSC reorganization by spinning-off the Group’s branded OTC business into a newly founded separate legal entity, has started its independent operations.

Key FY2014 IFRS Financial Highlights:

• FY2014 OTCPharm consolidated revenue amounted to RUB 16,646 m;
• Gross profit reached RUB 11,146 m, with the margin of 67%;
• the Company’s EBITDA amounted to RUB 5,923¹ m, with EBITDA margin of 36%;
• Net income reached RUB 4,004 m, with the margin of 24%;
• Net cash² amounted to RUB 918 m, as of 31 December 2014.

Company profile

OTCPharm OJSC (since 10 December 2014 – OTCPharm PJSC) was incorporated on 23 December 2013 following Pharmstandard OJSC reorganization by spinning-off the branded OTC business into the Company.

Since 1 April 2014, OTCPharm has started its operations independently of Pharmstandard Group.

Since 30 December 2014, the Company’s shares are traded on the Moscow Exchange.

OTCPharm PJSC is a #3 company in the Russian OTC pharmaceutical market by the market share in value terms, the Company’s product portfolio is represented in most of the largest therapeutic categories.

To date OTCPharm PJSC owns the exclusive rights for 28 brand names. The Company’s product portfolio comprises such well recognized brands like: Arbidol®, Pentalgin®, Complivit®, Flucostat ®, Aphobazolum®, Codelac®, Amixin®, Acipol®, Maxycold®, Rinostop®, Magnelis® В6, Noopept®, Asvitol®, Askophenum-P®, Next®, Lactazar®, Selmevit ®, Termicon®, Lactonorm®, Ciklovita®, Cinocap®, Univit®, Nitrocor®, Neosmectin®, Klarisens®, Spasmol®, Medira®, Aerovit®.

In parallel with the proprietary brand promotion, OTCPharm is engaged in marketing and promotion of third party branded pharmaceutical products: Lactofiltrum®, Filtrum-STI®, Mikrazym®, Dinolak® and Taufon®. These products are complementary to the current product portfolio and allow the Company to gain expertise in the relevant therapeutic categories.

FY2014 Performance

Before 1 April 2014, all OTC operations attributable to the Company’s core business have been reflected and accounted for in Pharmstandard’s accounts.

The consolidated financial data attributable to OTCPharm and its subsidiaries for the period from 23 December 2013 through 31 March 2014 has been extracted from Pharmstandard’s accounting books, which recorded the Company’s economic operations before 31 March 2014.

Revenue

OTCPharm’s revenue in 2014 reached RUB 16,646 m. It is attributed to sales in the two following categories: sales of the Company’s proprietary brands (organic products) and sales of third party products (TPPs).

BRAND	2013 (RUB m)	% of total sales	2014 (RUB m)	% of total sales	Growth 2014/2013 (RUB m)	Growth 2014/2013 (%)
Arbidol®	3 822	26%	2 890	17%	(933)	-24%
Pentalgin®	2 242	15%	2 759	17%	516	23%
Complivit®	1 669	11%	1 532	9%	(137)	-8%
Aphobazolum®	1 269	9%	1 426	9%	157	12%
Amixin®	1 205	8%	1 342	8%	136	11%
Flucostat®	848	6%	840	5%	(9)	-1%
Acipol®	612	4%	748	4%	136	22%
Codelac®	627	4%	679	4%	52	8%
Rinostop®	191	1%	395	2%	204	106%
Magnelis®	318	2%	359	2%	41	13%
Next®	169	1%	213	1%	45	27%
Askophenum-P®	148	1%	192	1%	44	29%
Selmevit®	150	1%	166	1%	15	10%
Termicon®	183	1%	165	1%	(18)	-10%
Maxycold®	106	1%	160	1%	55	52%
Other	471	3%	612	4%	142	30%
Total, organic sales:	14 031	94%	14 476	87%	445	3%
Taufon®	261	2%	941	6%	679	260%
Lactofiltrum®	337	2%	721	4%	384	114%
Mikrazym®	156	1%	293	2%	137	88%
Filtrum-STI®	88	1%	212	1%	124	140%
Dinolak®	-	0%	4	0%	4	-
Total, TPPs:	842	6%	2 171	13%	1 328	158%
TOTAL:	14 874	100%	16 646	100%	1 773	12%

 

Organic sales

FY2014 organic sales reached RUB 14,476 m accounting for 87% of total revenue. In 2014, the Company’s organic portfolio included 27 various proprietary branded products. 69% of organic sales accounted for by 5 best-selling brands: Arbidol®, Pentalgin®, Complivit®, Aphobazolum® and Amixin®.

In 2014, the Company’s organic portfolio was complemented with 7 new SKUs which are either new brands or new dosage forms of existing products. Most of these new SKUs were launched in Q3-Q4 2014, generating the revenue of RUB 134 m.

Brand / New dosage form	2014 (RUB m)	% of total sales
Arbidol ® Maximim	82	61%
Univit®	41	31%
Codelac® Neo tablets	6	4%
Complivit ® Ophthalmo	4	3%
Total:	134	100%

 

New brands

Univit® is a new fast growing brand in the Company’s product portfolio. Univit® is a vitamin and mineral complex available in four various dosage forms with specific formulations for kids and adults. Sales of Univit® brand commenced in Q3 2014 generating a revenue of over RUB 41 m.

New dosage forms of existing products

Arbidol® 200 mg – a new dosage form of the antiviral best-seller was released under Arbidol® Maximum brand name in December 2014 with the aim to further increase the market share of the main brand. Arbidol® Maximum added up RUB 82 m or 3% of total Arbidol® brand sales.

The expectorants and anti-cough Codelac® brand was complemented with a new sub-brand Codelac® Neo - modified release tablets for adults used for the therapy of non-productive (dry) cough.

A new dietary supplement Complivit® Ophthalmo for kids has been launched in line with the Complivit® umbrella brand development strategy aimed to the ongoing expansion of the product line to meet the customers’ needs in vitamins and minerals across all age groups.

Third party products (TPPs)

In 2014, TTP sales (brands: Taufon®, Lactofiltrum®, Dinolak®, Mikrazym®, Filtrum-STI®) reached RUB 2,170.5 m, with c.43% accounted for by Taufon®.

In 2014, OTCPharm’s TPP portfolio was complemented by a new TPP brand Dinolak® laxative.

Cost of Goods Sold (COGS)

In 214, COGS reached RUB 5,500 m accounting for 34% of sales revenue.

COGS in organic sales amounted to RUB 4,492 m, including the COGS attributable to products included in FY2014 Company’s sales but manufactured by Pharmstandard operating companies before the onset of the Company’s operations in April 2014.

COGS in TPP sales reached RUB 1,008 m.

Gross profit

As of 2014, the Company’s gross profit reached RUB 11,146 m accounting for 67% of total sales. Gross profit attributed to organic sales amounted to RUB 9,983.5 m or 69% of the Company’s total organic sales. Gross profit attributed to TPP sales reached RUB 1,163 m or 54% of total organic sales.

Operating expenses

Operating expenses in 2014 amounted to RUB 6,286 m or 38% of total sales. About 94% of operating expenses are attributable to the Company’s selling and distribution costs.

Selling and distribution costs (S&D)

In 2014, the Company’s selling and distribution costs amounted to RUB 5,878 m accounting for 35% of total sales. The Company’s business is primarily focused on the distribution of non-prescription (OTC) medicines, for this reason the major part of S&D costs is associated with direct OTC drug marketing and promotion in the mass media (TV, radio, print media, Internet advertising). Marketing and advertising costs reached RUB 3,862 m accounting for 66% of total S&D costs. Other significant costs were associated with:

• the agency fee of RUB 858 m payable to Pharmstandard OJSC, accounting for 14.6% of total S&D costs associated with the product distribution under the agency agreement;
• payroll and social tax costs attributed to marketing and promotion employees, which amounted to RUB 791 m or 13% of total S&D costs.

General and administrative expenses (G&A)

In 2014, the Company’s G&A costs amounted to RUB 260 m or 2% of total revenue. The management staff structure is aligned with the business processes being deployed and fine-tuned from the Company’s onset and substantially completed in Q3 2014. Most of the Company’s G&A expenses incurred in 2014 are associated with administrative personnel labour costs (c.53% of total G&A costs) and rental of office space and vehicles.

Other costs

In 2014, other costs reached RUB 148 m and are primarily attributed to the recognition of net loss of RUB 138.2 m resulting from foreign currency translation difference for operations denominated in foreign currencies due to the Russian Rouble devaluation.

Operating income

The Company’s consolidated operating income (revenue, COGS, operating expenses) in 2014 reached RUB 4,860 m or in relative terms 29% of sales revenue.

EBITDA

The Company’s EBITDA equals to the amount of earnings before deduction of tax, adjusted for depreciation and amortization of plant and equipment and intangible assets, foreign currency translation difference for operations denominated in currencies other than the Russian Rouble, and interest income/loss. In 2014, consolidated EBIТDA reached RUB 5,923 m representing in relative terms 36% of consolidated revenue.

Interest income

In 2014, interest income reached RUB 87.5 m, including interest income under short-term loans and income from short-term bank deposits placed during 2014.

Income tax expense

Accrued income tax for 2014 was RUB 944.0 m with 2014 effective tax rate of 19.1% assessed on income before tax.

Net income

The Company’s net income reached RUB 4,003.5 m in 2014 with net income margin of 24.1%.

Consolidated financial statements for the year ended 31 December 2014 are presented on the corporate web-site otcpharm.ru