OTCPharm OJSC reports its H1 2015 sales results

Moscow, July 27, 2015 – OTCPharm OJSC (the Company) announces its H1 2015 sales results.

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 #2 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 27 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®, Aerovit®.

In addition to the promotion of its own brands, OTCPharm is engaged in marketing and promotion of third party branded pharmaceutical products: Lactofiltrum®, Filtrum®, 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.

H1 2015 Key Events and Sales Highlights

• OTCPharm demonstrated increase in sales for a major part of its brands. Revenue increased by 6% h-o-h and reached RUB6.7 bn;
• As result of high-level cold and flu pandemia, the products of Anti-cold and Flu segment demonstrated significant h-o-h increase in sales: Amixin® (+42%), Codelac® (+52%), Maxicold® (+49%), Rinostop® (+179%). The publication of the interim results of the ARBITRATOR study¹ with the main task to obtain additional data on the efficiency and safety of Arbidol® in the treatment of flu or cold, became a remarkable event for cough and cold portfolio of the Company. The results reliably confirmed Arbidol’s impact on the duration of the flu and reduction of the period of elimination of the pathogen;
• However, medications of vitamins category (which is interfacing to Anti-cold and Flu segment medicine demand during the periods of colds and flu) also showed a significant positive trend (Complivit® +18%), which is associated with changes in the focus of the promotion and the launch of a new marketing communications (in particular, the active promotion in the sub-segment of vitamins for beauty);
• Sales of a new medicine Mycoderil® (INN: "naftifin") started In June 2015. This medicine is designed to treat fungal infections of nails and is the first Russian analog of the original imported product (according to IMS Health, market sales of the category "naftifin" during first 5 months of 2015 amounted to RUB 1,537 bln in retail prices);
• In June 2015 the Company started sales of the new sub-brand in the Сomplivit product line – Complivit the Chondro® (tablet No.30). Complivit Chondro® contains glucosamine and chondroitin that help rebuild cartilage tissue. Therefore, the Company first enters into the segment of "chondroprotectors" (according to IMS Health the segment volume within 5 months of 2015 amounted to RUB 1.9 bn in retail prices, the 16% increase over the same period of the previous year);
• In the 2Q 2015, the Company acquired the trademark Azitrox® (purchased from JSC "Pharmstandard", an INN: azithromycin). This transaction will help to expand the Company's cough and cold portfolio by adding a complementary brand, which is a broad-spectrum antibiotic. According to IMS Health, azitromycin segment volume during the first 5 months of 2015 amounted to RUB 305 bln, Azitrox® holds No 3 position in this segment in value terms.

H1 2015 Market Highlights

• In 5m2015 Russian retail OTC market demonstrated an 8% growth compared to the same period of the previous year and reached RUB170.4 bn;
• The average retail pack price increased by 22% to RUB 134 per pack;
• In 5m2015 OTCPharm maintained leadership in key segments of Russian pharmaceutical market and is #3 company on a Russian OTC market by revenue with a market share of 4.8%;
• OTCPharm has 2 brands in TOP15 products of the total retail market in Russia – Arbidol® and Pentalgin®, as well as 8 brands in TOP30 local products (Arbidol®, Pentalgin®, Aphobazolum®, Complivit®, Amixin®, Acipol®, Flucostat® and Codelac®).

SALES RESULTS

Porfolio Leaders are those products which are actively supported by the marketing team, and which share equals to 47% of total sales in H1 2015 (55% in H1 2014). The following brands fall under this category of sales: Arbidol®, Aphobazolum®, Complivit®, Pentalgin®, Flucostat®. These products demonstrated 9% decrease in sales in H1 2015, which is mainly a result of the decrease of purchasing power in 2015 and a reduction in sales volumes across all categories of drugs. Despite this, the Company holds leading positions in the respective segments (#1 analgesic and antifungal category, No. 2 in the cough category).

Pentalgin® demonstrated increase of its share in the analgesic category and confirmed its absolute leadership. Pentalgin® holds the No.1 position in the analgesic category for adults by revenue (H1 2015 revenue amounted to RUB 1,059 mln). However, due to the overall market conditions, Pentalgin® demonstrated 14% reduction of sales over the same period last year, along with the entire category of analgesics.

Based on the results of 5m2015, Flucostat® confirmed leadership in the category of antifungal drugs by revenue (41.3% share). According to the results of H12015 Flucostat® revenue decreased by 27% compared to the same period of the previous year, in line with the overall sales decrease of the category.

Aphobasolum® – the absolute leader of the tranquilizers/sedatives category, showed 27% decrease in revenue in H1 2015, mainly due to the decline in consumption of the category in general.

High growth brands –actively promoted smaller brands that constitute 18% of the H1 2015 revenue (15% in H1 2014). These brands include Amixin®, Acipol®, Magnelis® B6 and Next®. This category showed significant h-o-h growth of 23% with key drivers being Amixin® and Magnelis® B6.

In H12015 Amixin® sales increased by 42%, Magnelis® B6 by 41%, Next® by 13%, while Acipol® demonstrated insignificant decrease in sales.

Small brands with growth potential constitute 7% of the total H1 2015 revenue (3% in H1 2014). The largest contribution to the growth of this group was made by Rinostop® (+RUB 191 mln), it is also the undisputed growth leader within the group (+179%). Other medicines also demonstrated outstanding sales growth: Maxycold® (+49%), Cinocap® (+27%), Cyclovita® (+41%), Lactonorm® (+67%) and Lactazar® (+30%).

Small brands with a stable market share constitute 12% of the total sales in H1 2015. The largest product in this category by revenue is Codelac®, which demonstrated a significant increase in sales h-o-h of 52%. A significant contribution to the Group’s revenue made by Univit® (+RUB 37 mln, the new medicine with no sales in the same period of the previous year) and Noopept® (+RUB 12 mln).

Third Party Products showed 10% increase in sales h-o-h. The growth was achieved primarily due to the increase in sales of Mikrazym® (+51%) due the promotion focus change, as well as by increasing sales of Taufon® due to the involvement of a new channel of promotion.

OTCPharm business sales structure, H1 2015

1. Multicenter, randomized, double-blind, placebo-controlled study Arbitrator