Investors’ Day at Olainfarm
September 14, 2007
Company Presentation
OlainFarm: at a glance
- 35 years since established, 10 years since privatized
- Produces both FDFs and full cycle APIs
- Annual sales have more than doubled over the past 3 years
- Strong and seasoned management team
- ISO 14001 (2001:2007), FDA (USA - APIs only, 2002) and GMP (EU 2004:2007)
Major shareholders:- Olmafarm (sole shareholder is OlainFarm’s Chairman of the Board Valerijs Maligins) - Juris Savickis
Governing Structure
• Shareholders meeting
• Council- Supervisory body, which represents the shareholders' interests between the Shareholders’ meetings- Consists of 5 members, elected by shareholders for 3
years- Elects and dismisses members of the Board
• Board- Executive body, which manages and represents the
company- Responsible for commercial activities of the company- Composed of 5 members (recently reduced down from 7), elected for 3 years
Main Markets
Unconsolidated Sales by Market, H1 2007, % by Value
Great Britain
8%
Ukraine
12%
Kazakhstan
13%
Latvia
21%
Russia
28%
Other
4%
Bulgaria
1%Georgia
1%
Lithuania
2%
Poland
2%Belarus
8%
- Main focus on home market and the CIS
- Central and Western Europe growing mainly through APIs and intermediates
- Diversification of markets
- Over 200 medical representatives in key markets
- Sales to 25 countries, subsidiary in Russia
Main Markets (continued)
- On average the sales growfaster than markets (about 15%)
- Branding has slowed growthin Russia in terms of sales, not profit
- Specific products influenced significant growth in the UK and Kazakhstan
- Very limited exposure to Russian DLO Program (about200 000 LVL)
Sales development in Top 5 Markets ' 000 LVL
2067%
-10%
8%
24%
21%
974%
407%
42%
20%
4%
Ls 0
Ls 500
Ls 1 000
Ls 1 500
Ls 2 000
Ls 2 500
Ls 3 000
Russia Latvia Kazakhstan Ukraine Great Britain
1H 05
1H 06
1H 07
Key Products
Sales by Products 1H 2007 % by value
Fenkarol13%
Furamag/Furagin/Furasol11%
Neiromidin11%
Noofen/Fenibut11% PASA Sodium salt
10%
MAG7%
Remantadin6%
Adaptol5%
Etacizin4%
Other22%
- Antihistamine
- Sold as Bikarfen or Gistafen in selected markets
- Limited clinical tests conducted to strengthen sales
- Sales of antihistamines in our markets: approx 105 M LVL
- Maximum sales: 4.2 M LVL p.a.
Key Products - Fenkarol
Fenkarol/Bikarfen/Gistafen 6 months sales
Ls 0
Ls 200 000
Ls 400 000
Ls 600 000
Ls 800 000
Ls 1 000 000
Ls 1 200 000
1H 2003 1H 2004 1H 2005 1H 2006 1H2007
Noofen/Fenibut 6 months sales
Ls 0
Ls 200 000
Ls 400 000
Ls 600 000
Ls 800 000
Ls 1 000 000
Ls 1 200 000
1H 2003 1H 2004 1H 2005 1H 2006 1H2007
- Nootropic drug
- Sold as Fenibut in Russia and as Noofen elsewhere
- Cost efficient synthesis
- Participation in Russian DLO.Program discontinued in 2007, which caused slight drop in sales
- Total sales of this product group in our markets: 140 M LVL
- Maximum sales: 4.5 M LVL p.a.
Key Products - Fenibut
Neiromidin 6 months sales
Ls 0
Ls 200 000
Ls 400 000
Ls 600 000
Ls 800 000
Ls 1 000 000
Ls 1 200 000
1H 2003 1H 2004 1H 2005 1H 2006 1H2007
- Cholinesterase inhibitor
- Cost efficient chemical synthesis - Total sales of this product group in our markets: approx 300 M LVL as this is a multi-purpose drug for CNS related indications
- Maximum sales: 7 M LVL p.a.
Key Products - Neiromidin
Key Products - Furagin
Furamag/Furagin/Furasol 6 months sales
Ls 0
Ls 200 000
Ls 400 000
Ls 600 000
Ls 800 000
Ls 1 000 000
Ls 1 200 000
1H 2003 1H 2004 1H 2005 1H 2006 1H2007
- Nitrofurantoine derivative, anti-infective drug
- In process of replacement of Furagin with Furamag
- In sachets sold as Furasol
- Olainfarm is the only stable API producer in traditional markets
-Total sales of this product group in our markets: 70 M LVL
- Maximum sales: 4.5 M LVL p.a.
Key Products – PASA Sodium Salt
PASA Sodium Salt 6 months sales
Ls 0
Ls 100 000
Ls 200 000
Ls 300 000
Ls 400 000
Ls 500 000
Ls 600 000
Ls 700 000
Ls 800 000
Ls 900 000
Ls 1 000 000
1H 2003 1H 2004 1H 2005 1H 2006 1H2007
- Anti tuberculosis drug, helps to treat resistant forms of tuberculosis
- So far sold solely to governmental programs, thus sales are difficult to forecast
- World market approx. 300 M EUR
- Maximum sales: 5 M LVL p.a., limited by current production capacities
- Files are being prepared for WHO registration, allowing for worldwide sales
New Products – Current Status
Meldonium - Generic drug for treatment of cardio vascular diseases,
original among TOP 15 best selling drugs in Russia and TOP 3 best seller in Ukraine
- Current status: Registration files are being finished, bioequivalence tests started in Ukraine
- Expected launch: 2008
Expected sales in 2012 - LVL 4.5 mln
statNew Products – Current Status
Olvazol ®
- Patent protected next generation of Meldonium
- Fast acting drug for prophylaxis and treatment of ischemic heart and brain injury and infarction
- Current status: undergoing stability tests, clinical pilot trials to be started by the end of 2007.
- Expected launch: 2009
Expected sales in 2012 - LVL 4.5 mln
New Products – Current Status
R-Fenibut
- Pure enantiomeric form of known drug, at least 2x more effective than a
parent drug, thus requires ½ of dosage or less- Fewer side effects- Current status: scale-up and fine-tuning of technology under way, clinical
pre-trials to be started before the end of 2007- Expected launch: 2009
Expected sales in 2012 - LVL 3.2 mln
New Products – Current Status
R-Fenotropil
- New patented molecule, at least 2x more effective as parent drug, thus requires ½ of dosage or less and has fewer side effects
- Current status: scale-up and fine-tuning of technology under way, pre-clinical trials to be started before the end of 2007
- Expected launch: 2009
Expected sales in 2012 - LVL 4.0 mln
New Products – Current Status
Memantine
- Widely used for treatment of Alzheimer’s disease, running out of patent protection
- Olainfarm developed technology for worldwide sales
- Exclusive co-operation with a multinational company, Olainfarm will sell Memantine in CEE, CIS and Middle East
- Current status: registration by partner started in Germany, Canada; Olainfarm is finishing file to be submitted for registration early 2008
- Expected launch: 2009 (limited markets)
Expected sales in 2012: LVL 7.5 mln (subject to patent protection)
New Products – Current Status
New Generics Program for Baltics
- First stage includes five new first generics for the Baltic states, two for treatment of fungus, two for CNS diseases and one cardiovascular medicine
- Three of the five will be registered through Baltic MRP procedure
- Currens status: registration under way
- Expected launch: 2008
Expected sales in 2012 - LVL 2.1 mln
Estimated Sales, LVL '000
15 156 18 808 22 79627 127
31 99437 013
42 825190
1 6505 200
11 900
18 850
28 300
1 540
2 725
3 600
4 800
6 000
7 200
8 640
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
90 000
2006 2007F 2008F 2009F 2010F 2011F 2012F
API & Intermediates
New FDFExisting FDF
- Existing FDF products:- more marketing effort, branding, additional comparative tests; - strengthened network of medical representatives; - new forms and dosages of products;- new markets within FSU countries; - natural market growth; - price increases.
- New FDF products:- higher added value;- patent protected.
- APIs and intermediates - improved recognition of Olainfarm in the global market;- UK already among top markets.
Where will the growth come from?
Historic performance
Sales, Net Profit and EBITDA '000 LVL
5294
7368
10678
12985
16704
9491
16632 778 732
1 6582 508
3 4512 982
-797-3491 0261 148
-2000
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
2002 2003 2004 2005 2006 2007 H1
Sales
Net Profit EBITDA
Seasonality
Quaerterly Seasonality of Sales, EBIT, EBITDA, Net Profit '000 LVL
39543788
3640
5320
4900
4550
160326 280
630420
691 802 770
14001190
910
22238
78
440 485247
840
0
1000
2000
3000
4000
5000
6000
2006Q1 2006 Q2 2006 Q3 2006 Q4 2007 Q1 2007 Q2
Sales
EBIT
EBITDA
Net profit
Historic performance - Margins
Seasonality of Margins
17,48%
21,17% 21,20%
26,30%
24,30%
20%
4,05%
8,61%7,70%
15,80%
12,90%
9,20%
0,56%
6,28%
2,14%
8,27%
9,90%
5,43%
0,00%
5,00%
10,00%
15,00%
20,00%
25,00%
30,00%
2006Q1 2006 Q2 2006 Q3 2006 Q4 2007 Q1 2007 Q2
EBITDA Margin
EBIT Margin
Net margin
Historic Performance - Assets Asssets, LVL
25%36%
41% 40%37% 37%
16%14%
9%10%
5%
1%
18%
19%15%
16%
23%
22%
18%
31%
31%33%
42%
47%
7%0%
1%0%
2%
4%
0
5000000
10000000
15000000
20000000
25000000
30000000
2002 2003 2004 2005 2006 2007 1H
Other, inc. Cash
Debtors
Inventory &WIP
Intangibleassets
Fixed assets
Historic Performance - Equity and Liabilities
Equity & Liabilities LVL
59%54%
51%48%60%73%
25%
28%
27%30%23%
7%
3%
5%
7%8%9%
11%
13%
13%
15%15%
8%
10%
0
5000000
10000000
15000000
20000000
25000000
30000000
2002 2003 2004 2005 2006 2007 1H
Payables
Tax liabilities
Interest bearing debt
Equity and reserves
Share performance in 2007
-- Olainfarm-- OMX Riga
Share performance in 2007
-- Olainfarm-- OMX Nordic EUR GI
Investment Alternatives in 2007
Since January 1, 2007:
- DAX +12.55%
- Nikkei 225 -7.83%
- S&P 500 +2.36%
- CAC40 -2.11%
- FTSE 100 -0.54%
- SSMI -1.4%
IPO of June 2007
- 876 023 shares subscribed; 2 584 267.85 LVL raised
- Post issue number of shares: 14 085 078
- Raised amounts allowed to proceed with smaller items of CAPEX program, including warehousing and some production units
- Ampouling facility project postponed, not abandoned
Considerations for Further Activities
- Partial issue allowed to attract some leverage;
- Considerable CAPEX needs remain for 2008 and further years, especially as new products get launched into market;
- Limited possibilities for further significant leverage;
- Board and the Council to elaborate proposals by the end of this year.
35
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