Pharmacy Chain 36.6 reports 2005 semiannual results

17 AUGUST 2005, Moscow – OAO Pharmacy Chain 36.6 [MICEX: RU14APTK1007; RTS: APTK] released today its unaudited 2005 semiannual financial results prepared in accordance with International Financial Reporting Standards (IFRS).

In the first half of the year, Pharmacy Chain 36.6 expanded further into the regions, boosting retail sales by 52.9% while experiencing a net loss of USD 2.5 million. During this period, the Company opened 47 pharmacies and rebranded 9 pharmacies in both established markets as well as in new markets such as Samara, Yekaterinburg, Novosibirsk, Perm and Kazan.

Sales

— Consolidated 1H2005 sales at Pharmacy Chain 36.6 were USD 135 million, a 41.4% y-o-y increase.

— Sales at pharmacies amounted to USD 92.4 million, an increase of 52.9% on the previous year. This increase can be attributed primarily to new pharmacies opened in 2004. These new 69 pharmacies accounted for USD 24.8 million, or approximately 78% of total sales growth.

— In 1H2005, net sales reached USD 33.7 million at Veropharm, the Company’s generic pharmaceuticals subsidiary. This is a 22.4% increase from 1H2004. A government reimbursement programme continued in 2Q2005, when the first payments were received for previous shipments.

Profits

— While the retail margin of 32.1% was slightly lower than the previous year due to the expansion of regional operations, Veropharm’s margin continued to grow, reaching 60.1%. The overall consolidated gross profit grew to 35%.

— Further store openings brought retail EBITDA margin down to 2.5%.

— Veropharm’s EBITDA was up by 33.6% to USD 9.5 million.

— Consolidated net income fell to USD -2.5 million.

2005 Investment and Other Results

— Pharmacy Chain 36.6 made investments of USD 11.6 million, including the purchase of real estate in Moscow and other regions, the acquisition of a pharmacy chain in Novosibirsk, and the new marketing programme investments.

— The Company’s expansion was further financed by debt. Total debt reached USD 97.6 million by the end of 1H2005.

Comments:

Artem Bektemirov, Chief Executive Officer:

“This is not the first time that we have experienced a net loss in our interim results. Our strategy calls for ambitious, rapid growth in the initial stages. This is rarely possible without some short-term downturns, but we will see the benefits in the long term. At the same time, we are taking measures to improve the performance of existing stores. It is important to note that the pharmacies which we opened in 2004 accounted for about 78% of total sales growth in the first half of this year. We look forward to operating more than 400 pharmacies by the end of 2005. In 1H2005 we expanded into a number of important markets in central Russia, the Urals and the Volga region. 36.6 pharmacies were opened in Yekaterinburg, Samara, Kazan, Perm and other cities.”

Svein Aage Olsen, Chief Finance Officer:

“During 1H2005 we gradually ramped up our pharmacies that were purchased and opened this year, though the resulting increase in sales was lower then expected. We do not expect significant growth in our total credit portfolio in 2H2005. Pharmacy Chain 36.6, together with The Bank of Moscow, is organising a syndicated loan, which will allow us to extend our debt maturities and decrease our debt service expenses.”

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Press-release