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COMPANY PROFILE AUGUST 200 8 PowerPoint Presentation
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COMPANY PROFILE AUGUST 200 8

COMPANY PROFILE AUGUST 200 8

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COMPANY PROFILE AUGUST 200 8

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  1. COMPANYPROFILEAUGUST 2008

  2. DISLAIMER THIS PRESENTATION IS NOT AN ADVERTISEMENT OF SECURITIES IN ANY JURISDICTION. NOT FOR RELEASE, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA OR JAPAN. This document includes statements that are, or may be deemed to be, “forward-looking statements”. These forward-looking statements can be identified by the fact that they do not only relate to historical or current events. Forward-looking statements often use words such as” anticipate”, “target”, “expect”, “estimate”, “intend”, “expected”, “plan”, “goal” believe”, or other words of similar meaning. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, a number of which are beyond Company’s control. As a result, actual future results may differ materially from the plans, goals and expectations set out in these forward-looking statements. Any forward-looking statements made by or on behalf of the Company speak only as at the date of this announcement. Save as required by any applicable laws or regulations, the Company undertakes no obligation publicly to release the results of any revisions to any forward-looking statements in this document that may occur due to any change in its expectations or to reflect events or circumstances after the date of this document. The securities referred to herein have not been and will not be registered under the US Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States or to US persons unless the securities are registered under the Securities Act, or an exemption from the registration requirements of the Securities Act is available. No public offering of the securities will be made in the United States. This communication is being distributed only to and is directed only at (a) persons outside the United Kingdom, (b) persons who have professional experience in matters relating to investments, i.e., investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"), and (c) high net worth companies, unincorporated associations and other bodies to whom it may otherwise lawfully be communicated in accordance with Article 49 of the Order (all such persons together being referred to as "relevant persons"). The securities are available only to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be available only to or will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this communication or any of its contents. 2

  3. Founded in 1997 by Pharmacy Chain 36.6 and its shareholders One of the largest Russian generic drug manufacturers Operates three production facilities – in Belgorod, Voronezh, and Pokrov Employs 2,800 people Specializes mostly in prescription (RX) drugs Successful market player in oncology #1 by production and sales of adhesive bandages in Russia and Ukraine COMPANY IN BRIEF • IPO in April 2006 • Current market cap. $ 500 mln. • Trading at RTS and MICEX Tickers: VRPH (RTS) and VFRM (MICEX) • About 48% are currently in the free float 3

  4. PRODUCT GROUPS Sales in 2006, US$m Sales in 2007, US$m Rx Products, 60% Rx Products, 54% Adhesive Bandages, 18% Adhesive Bandages, 21% $ 137.9m $ 99.0m Traditional Products, 14% Traditional Products, 17% OTC Products, 8% OTC Products, 8% Gross Profit 2007, US$m Gross Profit in 2006, US$m Rx Products, 69% Rx Products, 63% Adhesive Bandages, 15% Adhesive Bandages, 20% $ 62.5m $ 89.3m Traditional Products, 8% Traditional Products, 10% OTC Products, 8% OTC Products, 7% 4 Source: Management accounts

  5. PRODUCT GROUPS Sales in 1H2007, US$m Sales in 1H2008, US$m Rx Products, 65% Rx Products, 54% Adhesive Bandages, 20% Adhesive Bandages, 21% $ 86.5m $ 57.6m Traditional Products, 7% Traditional Products, 17% OTC Products, 8% OTC Products, 8% Gross Profit 1H2008, US$m Gross Profit in 1H2007, US$m Rx Products, 73% Rx Products, 63% Adhesive Bandages, 16% Adhesive Bandages, 19% $ 35.9m $ 58.7m Traditional Products, 3% Traditional Products, 11% OTC Products, 8% OTC Products, 7% 5 Source: Management accounts

  6. FAST-GROWING MARKET 22 250 13 500 17 320 11 180 15 310 19 700 8 370 10 700 Pharmaceuticals market in retail prices, US$ million, VAT included CAGR*(2005-2012E) = 15% * Compound Annual Growth Rate 13% 14% 0% CAGR(05-12) FRP = 9% 13% 0% 13% 21% 0% 16% 4% 2% CAGR(05-12) Commercial sector = 18% 17% 28% 44% 17% -32% 18% 79% 18% 18% CAGR(05-12) Hospital sector = 7% 20% 7% 5% 8% 6% 6% 9% 7% 6 Source: Pharmexpert 2007

  7. MARKETSTRUCTURE Pharmacy, 71% Import, 79% $ 11,2 bln. 100% Hospital, 14% FRP, 12% BAD, 3% Local, 21% Market Structure Imported VS Domestic drugs, US$ Market statistics • Imported drugs account for approximately ¾ of the market in value terms • Hospital sales share is the same as in the previous year • Share of FRP decreased by 11%and amounted 12% of total market sales Rx VS OTC, in US$ terms Rx VS OTC, in number of packssold Rx, 34% Rx, 65% 100% 100% OTC, 66% OTC, 35% 7 Source: Pharmexpert, RMBC 2006-2007

  8. TOP RUSSIAN PRODUCERS 8 Source: Pharmexpert, 2007

  9. FRP SALES 2006 2007 - 8% FRP sales = $6.3 mln FRP sales = $5.8 mln. FRP sales FRP sales other sales other sales 9 Source: Management accounts

  10. FRP SALES 1q2007 1q2008 - 11% FRP sales = $1.0 mln FRP sales = $0.9 mln. FRP sales FRP sales other sales other sales 10 Source: Management accounts

  11. PRODUCTION FACILITIES VORONEZH Built in 1934 Production: ampoules, zinc oxyde & all types of plasters Employees: 1,356 POKROV Built in 1998 Production: flacons (lyophilized & liquid forms) Employees: 262 3 plants in the European part of Russia 2,717 factory employees as of December 31, 2007 Flexible manufacturing facilities that allow: • cost-efficient production of both small and large batches • quick shifts from one product to another BELGOROD Built in 1968 Upgrade in 2001 Production: ampoules, tablets, capsules, dragee Employees: 1,099 11

  12. COMPETITIVE STRENGTHS • Competitive vs Foreign producers • Flexible manufacturing provides for targeting product niches protected by entry barriers and where economies of scale are hardly to be achieved • Strong established corporate brand and reputation • Wide portfolio in different pharmaceutical groups • Competitive vs Domestic producers • Well recognizable reputation • Wide portfolio in different pharmaceutical groups • Quality assurance

  13. FOUR BUSINESS SEGMENTS Rx Adhesive Bandages ОТС Segment Attractiveness Traditional Competitive Advantages • Prescription (Rx) products • Wide portfolio of generics • Targeted at specialists • Active promotion • Distributed in hospitals and pharmacies + FRP • Over-the-counter products • All products are individually branded • Active promotion • Distributed through pharmacies • Traditional products • Old generic drugs – former Rx and OTC products • Wide portfolio • No active promotion • Distributed in hospitals and pharmacies + FRP • Adhesive bandages • A full range of primary care products • Wide spectrum of both branded/ unbranded types • Active promotion • Distributed mostly through pharmacies Business Units Promoted Drugs Hospital Sales Rx Pharmacy Sales Rx and OTC Traditional Traditional Adhesive Bandages Adhesive Bandages

  14. PRODUCT GROUPS Sales in 2007, US$m • Fast-growing segments • Rx products Sales CAGR 03-07: 57% • OTC products Sales CAGR 03-07: 30% Rx Products, 60% Adhesive Bandages, 18% $ 137.9m Traditional Products, 14% OTC Products, 8% Cash-cows • Traditional products Sales CAGR 03-07: 9% • Adhesive bandages Sales CAGR 03-07: 7% Gross Profit 2007, US$m Rx Products, 69% Adhesive Bandages, 15% $ 89.3m Traditional Products, 8% OTC Products, 8% 14 Source: Management accounts

  15. PRODUCT PROFITABILITY TRADITIONAL PRODUCTS Products: 40 Sales 2007: $ 19.4m Growth ’07: 16.1% Sales 2006: $ 16.7m G.Pr.2007: $ 7.2m G.Pr.2006: $ 6.3m RX PRODUCTS Products: 117 Sales 2007: $ 82.1m Growth ’07: 55.5% Sales 2006: $ 52.8m G.Pr.2007: $ 61.3m G.Pr.2006: $ 39.1m Gross margin Gross margin 74.6% 74.1% 72.6% 37.4% 37.2% 32.1% 2005 2006 2007 2005 2006 2007 ADHESIVE BANDAGES Products: 209 Sales 2007: $ 24.6m Growth ’07: 16.7% Sales 2006: $ 21.1m G.Pr.2007: $ 13.9m G.Pr.2006: $ 12.6m Gross margin OTC PRODUCTS Products: 10 Sales 2007: $ 11.8m Growth ’07: 40.5% Sales 2006: $ 8.4m G.Pr.2007: $ 7.0m G.Pr.2006: $ 4.5m Gross margin 64.5% 59.6% 56.3% 59.1% 54.3% 48.7% 15 2005 2006 2007 2005 2006 2007 Source: Management accounts

  16. TOP-SELLERS BY PRODUCT GROUPS TRADITIONAL PRODUCTS RX PRODUCTS Best-sellers (share in sales of group) Novocain (Procaine) – 17% Pyridoxine (Pyridoxine) – 13% Thiamine chloride (Thiamine) – 10% Calcium gluconate (Calcium gluconate ) – 8% Nicotinic acid (Nicotinic acid) – 7% Best-sellers (share in sales of group) Paclitaxel-LENS (Paclitaxel) – 9% Doxorubicin–LENS (Doxorubicin) – 9% Bylumid (Bycalutamid) – 8% Irunin (Itraconazole) – 7% Cerepro (Choline alfoscerate) – 7% OTC PRODUCTS ADHESIVE BANDAGES Best-sellers (share in sales of group) Bactericidal plaster – 36% Fixation plaster – 35% Pepper plaster – 18% Corn plaster – 11% Best-sellers (share in sales of group) Xylen (Xylomethazoline) – 53% Slabilen (Sodiumpicosulfate) – 22% Motilak (Domperidone) – 16% Vitasharm (Polyvitamins) – 8% Vitatress (Polyvitamins) – 1% 16 Source: Management accounts, 2007

  17. DEVELOPMENT AND LAUNCH OF NEW PRODUCTS Main products launched in 2004 • Amlodipine tabl. • Bicalutamide (Bilumid) • Idarubicin (Rubida) caps. • Idarubicin (Rubida) lyoph. • Irinotecan (Iriten) fluid • Levocarbidopa tabl. • Ondansetron tabl. • Ribavirin, fluid, for inj. • Sertraline (Torin) tabl. • Stavudine caps. • Thioridazine (Tison) tabl. • Amiodaron tabl. • Amiodaron, fluid Main products launched in 2005 • Bicalutamide (Bilumid) tabl. • Fludarabine (Vero-Fludarabin) lyoph. • Glicerylphosphorylcholine (Cerepro) caps. • Vinorelbine (Maverex) solution • Azithromycine (Z-factor) • Ciclosporin (Ciclopren) • Epoetin (Vero-Epoetin) • Docetaxel (Tautax) Main products launched in 2006 • Ademetionine (Heptor) • Gemifloxacin (Factive) • Ornidazol (Ornidazol-Vero) • Zidovudine (Zidovirin) • Azithromycine (Z-factor) new FOD • Choline alfoscerate (Cerepro) new FOD • Ginkgo Biloba (Ginos) • We have launched 65 pharmaceuticals in the past 5 years • To achieve success of our products, we maintain active promotion within 18 months from launch Development Pipeline • Anti-Tumor 26 Rx drugs • Central Nervous system 10 Rx drugs • Digestives 6 Rx drugs • Blood 5 Rx drugs • Hormones 5 Rx drugs • Antibacterial 4 Rx drugs • Gynecology and urology 4 Rx drugs • Musculoskeletal system 2 Rx drugs • Antiviral 1 Rx drug • Cardiovascular system 1 Rx drug • Dermatoses 1 Rx drug • Respiratory system 1 Rx drug • Others Rx 5 Rx drugs • Digestives 1 OTC drug TOTAL 71 RX / 1 OTC Main productslaunched in2007 • Letrozole (Extraza) • Benzalkonia cloride (Ginekotex) • Betagistine (Betaver) • Spiramycin (Spiramycin-Vero) • Folinic acid (Leukovorin) new FOD • Kladribin (Vero-Kladribin) • Oksaliplatin (Ekzorum) • Giterna tabl. • Aprotinin (Vero-Narkap) new indication • Poly-A & Poly-U (Poludan) new indication • Doxorubicin (Doxorubicin) new FOD 17

  18. PRESCRIPTION (RX) PRODUCTS • Utilize and leverage existing sales force and develop it in accordance with the portfolio development. • Target clinical specialists and opinion leaders in complex therapeutic areas rather than general practitioners. • Build corporate reputation through targeted education of medical professionals. • Bringing modern off-patent drugs to market • Rely on RX products selling via retail channels • Improvement of product management functions through decentralization 18

  19. HOSPITALPRODUCTS Share in value terms: VEROPHARM 1,14 % 2007 77,3% 22,7% VEROPHARM 1,0% 2006 77,9% 22,1% 0 10 20 30 40 50 60 70 80 90 100 Import % Local % 19 Source: RMBC, Hospital audit, 2006-2007

  20. HOSPITAL MARKET 20 Source: RMBC, Hospital audit, 2006-2007

  21. RELY ON RX VIA RETAIL CHANNELS +55% +21% Products that sell through retail channels and have a wide, diversified customer base are growing faster than hospital products that have a more concentrated customer base RX products Other sales:OTC, plasters, traditional products USD$mln 82,1 55,8 46,2 52,8 17% 50% 22,3 24% 71% 29% 2006 2007 2006 2007 21 Source: Management accounts

  22. OTC PRODUCTS • Focus on maintenance of existing products, minimizing investment and advertising costs • Opportunistically develop only major attractive products as they lose patent protection • Focus on building relationships with retail chains • Individual product branding • Piggy-back on specialist field force if products could be promoted alongside our Rx portfolio 22

  23. TRADITIONAL PRODUCTS • Zero-cost maintenance of the existing portfolio • No new product development • Exploiting natural demand for high quality traditional INNs • Opportunistic inclusion in reimbursement schemes, where economically justified • No active promotion

  24. ADHESIVE BANDAGES • Development of value added branded product portfolio in underdeveloped niches (specialty foot care, analgesic, burn care, smoking cessation etc.) • Focus on building preferred and exclusive relationships with the retail chains, enabling POS activity, distribution coverage and preferred merchandising positions

  25. SMART BANDAGES • Bactericidal category - launched • Bleed category – to be launched 25

  26. MANAGEMENT STRUCTURE Timur TCHIBILYAEV R&D Director Alexander TSVIGUN Technology& Manufacturing Director Evgeniy DREGNIN Sales Director Natalia EREMEEVA Marketing Director Svetlana KUTUKOVA HR Director Marina PENKOVA Chief Executive Officer Oleg KUZNETSOV Director of hospital Rx Department Stanislav STUKALSKY Adhesive Bandages BU Director Evgeniy DREGNIN Traditional BU Director Ivan KONOPLYANNIKOV Pharmacy BU Director 26

  27. FINANCIALS & ANALYSIS IFRS – FY 2007, FY 2006, FY 2005, FY 2004 audited by Deloitte

  28. SHARE PRICE M.CAP $ 500MLN (as at01-August-08 as per RTS) • IPO in April 2006 • Shares placedat $28 per share • Tickers: VRPH (RTS),VFRM (MICEX) • About 48% are currently in the free float 28

  29. SELECTED FINANCIALS CAGR = 33% CAGR = 37% CAGR = 40% CAGR = 39% Sales EBITDA 139,5 42,5 100,5 79,4 28,9 24,0 59,6 16,4 2004 2005 2006 2007 2004 2005 2006 2007 Gross profit Net income 86,7 27,7 60,1 18,4 47,0 16,0 32,2 10,1 29 2004 2005 2006 2007 2004 2005 2006 2007 In USD Millions

  30. SALES & GROSS PROFIT • Growth in Rx hospital portfolio • Increase in higher-margin products sales • FRP sales amounted to 6% in 2006; 4% in 2007 Sales 139,5 Gross profit 30 30 In USD Millions

  31. SALES & GROSS PROFIT • Growth in Rx hospital portfolio • Increase in higher-margin products sales • FRP sales amounted to 4% in 1q2007; 3% in 1q2008 Sales 34,7 24,1 Gross profit 31 In USD Millions

  32. SALES ANALYSIS (17.7%) (58.9%) (21.0%) (24.6%) 139.5 100.5 (52.6%) 79.4 (45.4%) (13.9%) (19.2%) (16.7%) (8.4%) (8.3%) (9.0%) (1.4%) (1.1%) (1.8%) RX Adhesive bandages OTC 32 32 Others Traditional In USD Millions, % as percentage of Sales

  33. SALES ANALYSIS (18.1%) (19.3%) (59.8%) 34.7 24.1 (51.7%) (18.6%) (8.3%) (8.5%) (9.9%) (4.1%) (1.7%) RX Adhesive bandages OTC 33 Others Traditional In USD Millions, % as percentage of Sales

  34. COST OF SALES (23%) (8%) 52.8 (8%) (38%) 40.4 (22%) (7%) (40%) 32.4 (24%) (2%) (41%) (1%) (2%) (2%) (1%) (2%) (6%) (5%) (6%) Raw materials and goods for resale Salaries and wages Repairs and maintenance Depreciation of manufacturing assets Other • Cost structure remained without significant changes • COS increased by 30.7% in 2007 34 34 In USD Millions, % as percentage of Sales

  35. COST OF SALES (9%) (9%) (1%) (1%) (1%) 12.9 (2%) (37%) 8.7 (17%) (36%) (15%) (9%) (9%) Raw materials and goods for resale Salaries and wages Repairs and maintenance Depreciation of manufacturing assets Other • Cost structure remained without significant changes • COS increased by 47.6% in 1q2008 y-o-y 35 In USD Millions, % as percentage of Sales

  36. SG&A Salaries and wages Commercial expenses and Advertising Travel and transportation Other (11%) (8%) 46.8 (12%) (12%) (34%) 34.3 (10%) (11%) (34%) (2%) (2%) 25.0 (32%) (2%) (9%) (12%) (9%) • SG&A increased by 36.7% in 2007 • Promotion expenses associated with newly launched products increased 36 36 In USD Millions, % as percentage of Sales

  37. SG&A Salaries and wages Commercial expenses and Advertising Travel and transportation Other (15%) (12%) (7%) (16%) 13.7 (39%) 9.1 (38%) (1%) (1%) (11%) (14%) • SG&A increased by 50.8% in 1q2008 y-o-y • Promotion expenses associated with newly launched products increased 37 In USD Millions, % as percentage of Sales

  38. EBITDA & NET INCOME • EBITDA increased by 47.3% in 2007 • Net income increased by 51.0% in 2007 EBITDA 42,5 28,9 24,0 Net income 38 38 In USD Millions

  39. EBITDA & NET INCOME • EBITDA increased by 29.6% in 1q2008 y-o-y • Net income increased by 14.9% in 1q2008 y-o-y 9,2 EBITDA 7,1 Net income 39 In USD Millions

  40. CASH FLOW 2007 2006 40 40 In USD Millions

  41. CASH FLOW 1q2008 1q2007 41 In USD Millions

  42. BALANCE SHEET CL DEBT OTHER EQ CA NCA 2006 2005 2007 42 42 In USD Millions

  43. BALANCE SHEET CL DEBT OTHER EQ CA NCA 43 2007 1q2008

  44. Address: bld.3, Barabanniy side-street Moscow, 105062 Tel.: +7 (495) 792-5330 Fax: +7 (495) 792-5328 E-mail: info@veropharm.ru www.veropharm.ru 44