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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. 35