Veropharm announces financial results for H1 2007

SEPTEMBER 3, 2007, MOSCOW – OAO VEROPHARM [RTS:VRPH, MICEX:VRFM] announces its unaudited financial results for H1 2007 in accordance with the International Financial Reporting Standards (IFRS).

Sales

• Sales in H1 2007 were up 31.7% year-on-year and totaled US$59.5 million.
• The sales volume of finished products in H1 2007 totaled US$57.6 million.*
• The share of prescription drugs in VEROPHARM’s sales increased in H1 2007 to 54.2%, compared to 51.0% in H1 2006. The share of adhesive bandages in total sales decreased to 20.8%, down from 22.7% a year earlier. Non-prescription (OTC) medications decreased their share to 7.9%, down from 9.5% in H1 2006. The share of VEROPHARM’s traditional medications portfolio rose from 16.7% to 17.1%.*
• VEROPHARM’s sales as part of the Federal Reimbursement Program (DLO) totaled US$2.1 million in H1 2007, which represented 3.6% of the Company’s finished goods sales. The DLO Program sales in H1 2006 totaled US$3.4 million (7.8% of finished goods sales).

Profits

• VEROPHARM’s gross profits in H1 2007 grew 32.0% year-on-year and reached US$36.6 million.  The gross profit margin grew from 61.4% a year earlier to 61.5%.
• The gross profit margin for delivery of finished products decreased from 63.2% in H1 2006 to 62.7% in H1 2007. The gross profit margin decreased following the changes in the finished goods sales structure.
• Results from H1 2007 demonstrated year-on-year drop in gross profit margin in the following segments: RX drugs – from 75.6% to 73.1%; OTC medications – from 57.9% to 55.8%; and adhesive bandages – from 60.9% to 57.0%. The gross profit margin for traditional drugs increased from 31.9% to 40.1%.
• The Company’s EBITDA increased by 41.0% year-on-year, reaching US$17.0 million. The EBITDA margin for H1 2007 amounted to 28.6%.
• VEROPHARM’s net profit in H1 2007 was up 47.9% year-on-year and totaled US$11.0 million.

Debt

• VEROPHARM’s debt at the end of H1 2007 totaled US$21.4 million.

* hereinafter financials are as per OAO VEROPHARM management accounts.

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Press-release