Transcript JSC "Olainfarm" Investors` day presentation

Investors’ Day at
Olainfarm
Company Presentation
September 14, 2007
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
- 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 grow
faster than markets
(about 15%)
Sales development in Top 5 Markets ' 000 LVL
Ls 3 000
24%
4%
Ls 2 500
1H 05
42%
Ls 2 000
1H 06
8%
1H 07
Ls 1 500
407%
21%
- Branding has slowed growth
in Russia in terms of sales, not
profit
20%
Ls 1 000
974%
-10%
Ls 500
2067%
- Specific products influenced
significant growth in the UK
and Kazakhstan
Ls 0
Russia
Latvia
Kazakhstan
Ukraine
Great Britain
- Very limited exposure to
Russian DLO Program (about
200 000 LVL)
Key Products
Sales by Products 1H 2007 % by value
Noofen/Fenibut
11%
Neiromidin
11%
PASA Sodium salt
10%
MAG
7%
Furamag/Furagin/Furasol
11%
Remantadin
6%
Adaptol
5%
Etacizin
4%
Fenkarol
13%
Other
22%
Key Products - Fenkarol
- Antihistamine
Fenkarol/Bikarfen/Gistafen 6 months sales
- Sold as Bikarfen or Gistafen
in selected markets
Ls 1 200 000
Ls 1 000 000
- Limited clinical tests
conducted to strengthen sales
Ls 800 000
Ls 600 000
- Sales of antihistamines in our
markets: approx 105 M LVL
Ls 400 000
Ls 200 000
Ls 0
1H 2003
1H 2004
1H 2005
1H 2006
1H2007
- Maximum sales:
4.2 M LVL p.a.
Key Products - Fenibut
- Nootropic drug
Noofen/Fenibut 6 months sales
Ls 1 200 000
- Sold as Fenibut in Russia
and as Noofen elsewhere
Ls 1 000 000
Ls 800 000
- Cost efficient synthesis
Ls 600 000
- Participation in Russian DLO.
Program discontinued in 2007,
which caused slight drop in sales
Ls 400 000
Ls 200 000
Ls 0
1H 2003
1H 2004
1H 2005
1H 2006
1H 2007
- Total sales of this product group
in our markets: 140 M LVL
- Maximum sales: 4.5 M LVL p.a.
Key Products - Neiromidin
- Cholinesterase inhibitor
Neiromidin 6 months sales
- Cost efficient chemical
synthesis
Ls 1 200 000
Ls 1 000 000
Ls 800 000
- Total sales of this product
group in our markets: approx
300 M LVL as this is a multipurpose drug for CNS related
indications
Ls 600 000
Ls 400 000
Ls 200 000
Ls 0
1H 2003
1H 2004
1H 2005
1H 2006
1H2007
- Maximum sales: 7 M LVL p.a.
Key Products - Furagin
- Nitrofurantoine derivative, antiinfective drug
Furamag/Furagin/Furasol 6 months sales
- In process of replacement of
Furagin with Furamag
Ls 1 200 000
Ls 1 000 000
- In sachets sold as Furasol
Ls 800 000
Ls 600 000
- Olainfarm is the only stable API
producer in traditional markets
Ls 400 000
Ls 200 000
Ls 0
1H 2003
1H 2004
1H 2005
1H 2006
1H2007
-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
- Anti tuberculosis drug, helps to
treat resistant forms of tuberculosis
PASA Sodium Salt 6 months sales
- So far sold solely to
governmental programs, thus
sales are difficult to forecast
Ls 1 000 000
Ls 900 000
Ls 800 000
Ls 700 000
- World market approx. 300 M
EUR
Ls 600 000
Ls 500 000
Ls 400 000
Ls 300 000
Ls 200 000
Ls 100 000
Ls 0
1H 2003
1H 2004
1H 2005
1H 2006
1H2007
- 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
New Products
stat – 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, preclinical 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
90 000
80 000
8 640
70 000
60 000
7 200
28 300
6 000
50 000
18 850
4 800
40 000
11 900
3 600
30 000
20 000
10 000
2 725
1 540
5 200
1 650
190
15 156
18 808
2006
2007F
22 796
27 127
31 994
37 013
42 825
0
2008F
2009F
2010F
2011F
2012F
API & Intermediates
New FDF
Existing FDF
Where will the growth come from?
- 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.
Historic performance
Sales, Net Profit and EBITDA '000 LVL
18000
16704
16000
14000
12985
12000
10678
9491
10000
6000
Sales
Net Profit
EBITDA
7368
8000
5294
3 451
4000
2000
1 658
-349
1 148
-797
1 026
16
2 508
2 982
632
778
732
2005
2006
2007 H1
0
-2000
2002
2003
2004
Seasonality
Quaerterly Seasonality of Sales, EBIT, EBITDA,
Net Profit '000 LVL
6000
5320
4900
5000
4000
4550
3954
3788
3640
Sales
EBIT
EBITDA
Net profit
3000
2000
1400
840
1000
802
691
160
326
22
238
770
280
440
1190
910
630
485
78
420
247
0
2006Q1
2006 Q2
2006 Q3
2006 Q4
2007 Q1
2007 Q2
Historic performance - Margins
Seasonality of Margins
30,00%
26,30%
25,00%
24,30%
21,17%
21,20%
20,00%
20%
17,48%
EBITDA Margin
EBIT Margin
Net margin
15,80%
15,00%
12,90%
10,00%
9,90%
8,61%
7,70%
8,27%
6,28%
5,00%
9,20%
5,43%
4,05%
2,14%
0,00%
0,56%
2006Q1
2006 Q2
2006 Q3
2006 Q4
2007 Q1
2007 Q2
Historic Performance - Assets
Asssets, LVL
30000000
0%
7%
25000000
18%
31%
20000000
0%
1%
22%
2%
15000000
33%
4%
31%
18%
42%
10000000
Debtors
16%
47%
16%
15%
19%
10%
9%
5000000
41%
40%
1%
36%
2004
2005
Intangible
assets
Fixed assets
37%
37%
2006
2007 1H
25%
0
2002
2003
Inventory &WIP
14%
5%
23%
Other, inc. Cash
Historic Performance - Equity
and Liabilities
Equity & Liabilities LVL
30000000
13%
25000000
13%
3%
5%
25%
20000000
15%
15000000
10000000
10%
11%
7%
8%
9%
8%
23%
30%
15%
Payables
Tax liabilities
Interest bearing debt
Equity and reserves
28%
7%
27%
59%
54%
5000000
73%
60%
48%
51%
2002
2003
2004
2005
0
2006
2007 1H
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.
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