OTCPharm PJSC reports 1H2015 IFRS Results
Moscow, 28 August 2015 – OTCPharm PJSC (RTS: OTCP) (“OTCPharm” and/or the “Company”) reports its Unaudited IFRS Results for the 6 months ended 30 June 2015.
Key 1H2015 IFRS Financial Highlights
- 1H2015 OTCPharm consolidated revenue amounted to RUB 6,739 m, which is 6% increase over 1H2014;
- Gross profit reached RUB 4,490 m, with the margin of 67%, against RUB 4,210 and 66% respectively in the 1H2014;
- the Company’s EBITDA amounted to RUB 1,725 m, with EBITDA margin of 26%;
- Net income reached RUB 1,064 m, with the margin of 16%;
- Net cash amounted to RUB 854 m, as of 30 June 2015.
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 29 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®, Azitrox®, Mycoderil®.
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.
OTCPharm’s revenue in the 1H2015 increased 6.4% over the 1H2014 and reached RUB 6,739 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).
|% of total sales|| 1H2014|
|% of total sales|| Growth 1H2015/1H2014|
| Growth 1H2015/1H2014|
|Total, organic sales||5,602||83.1%||5,302||83.7%||300||5.7%|
1H2015 organic sales revenue reached RUB 5,602 m accounting for 83% of total revenue. In the 1H2015, the Company’s organic portfolio included 29 various proprietary branded products. 51% of organic sales accounted for by 5 best-selling brands: Arbidol®, Pentalgin®, Complivit®, Aphobazolum® and Amixin®.
In the 1H2015, the Company’s organic portfolio was complemented with 3 new SKUs which are either new brands or new dosage forms of existing products. Most of these new SKUs were launched in 2Q2015, generating the revenue of RUB 8.6 m.
|Brand / New dosage form|| 1H2015|
In the 2Q2015, the Company acquired the trademark Azitrox® which helped to expand the Company's cough and cold portfolio by adding a complementary brand, which is a broad-spectrum antibiotic.
Sales of a new brand Mycoderil® commended in June 2015. This medicine is designed to treat fungal infections of nails and is the first Russian analog of the original imported product.
New dosage forms of existing products
In June 2015 the Company started sales of the new sub-brand in the Сomplivit product line – Complivit 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".
Third party products (TPPs)
In the 1H2015, TTPs sales (brands: Taufon®, Lactofiltrum®, Dinolak®, Mikrazym®, Filtrum-STI®) reached RUB 1,136 m, with c.50% accounted for Taufon®.
Cost of Goods Sold (COGS)
In the 1H2015, COGS reached RUB 2,248 m (or 34% of sales revenue) demonstrating an increase in-line with revenue growth (6.0% growth against 6.4% revenue growth).
COGS in organic sales amounted to RUB 1,708 m, COGS in TPPs sales reached RUB 540 m.
In the 1H2015, the Company’s gross profit amounted for RUB 4,490 m. Gross margin reached 67%, demonstrating an increase over 66% in the 1H2014.
Gross profit attributed to organic sales amounted to RUB 3,894 m or 70% of the Company’s total organic sales. Gross profit attributed to TPP sales reached RUB 597 m or 53% of total TPPs sales.
Selling and distribution costs (S&D)
In the 1H2015, the Company’s selling and distribution costs amounted to RUB 3,054 m accounting for 45% of total sales. The Company’s business is primarily focused on sale and distribution of non-prescription (OTC) medicines, therefore 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 1,903 m accounting for 62% of total S&D costs, the increase relates to the launch of TV advertising of Rinostop®, Noopept®, Mikrazym® and Taufon®.
Other significant costs were associated with:
- payroll and social tax costs attributed to marketing and promotion employees, which amounted to RUB 513 m or 17% of total S&D costs. The increase in payroll expenses of 16% relates to the fact that in the 1Q2014 marketing and promotion staff was employed by Pharmstandard PJSC, as well as marketing and promotion staff restructuring since 01 January 2015, planned salary indexation and social taxes.
- the agency fee of RUB 436 m payable to Pharmstandard PJSC, accounting for 14% of total S&D costs associated with the product distribution under the agency agreement. The two-times increase in agency fee is a result of start of independent operating activity of the Company since 01 April 2014, therefore in the 1Q2014 the agency fee was not accrued;
- rent of vehicles for the purposes of marketing and promotion department. Rent expenses increased 20% following fleet growth.
General and administrative expenses (G&A)
In the 1H2015, the Company’s G&A costs amounted to RUB 189 m or 3% 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. An average number of administrative personnel in the 1H2015 increased two times compared to the same period of last year, which resulted an increase in administrative personnel labour costs by 25%. Also an increase of office spaces and increase of rental rates denominated in foreign currencies following RUB depreciation resulted to an increase of rent expenses (+RUB 32 m).
Net other income
In the 1H2015, net other income amounted to RUB 68 m and are primarily attributed to the recognition of net income of RUB 138.2 m resulting from foreign currency translation difference for operations denominated in foreign currencies (revaluation of accounts payable) due to RUB appreciation within the reporting period from 56.26 RUBUSD on 31 December 2014 to 55.52 RUBUSD on 30 June 2015.
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 the 1H2015, consolidated EBIТDA reached RUB 1,725 m representing 26% of consolidated revenue.
In the 1H2015, interest income reached RUB 27 m, including interest income under short-term loans and income from short-term bank deposits placed during the 1H2015. Interest income decreased by 62% following decrease in cash from RUB 74 m on 30 June 2014 to RUB 21 m on 30 June 2015
The Company’s net income reached RUB 1,064 m in the 1H2015 with net income margin of 16%.
Consolidated financial statements for the 6 months ended 30 June 2015 are presented on the corporate web-site otcpharm.ru
 EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) equals to the amount of earnings before deduction of tax, adjusted for depreciation and amortization, foreign currency translation difference for operations denominated in currencies other than the Russian Rouble, and interest income.
 Calculated as Cash + Short-Term Investments – Short-Term and Long-Term Loans and Borrowings