PLIVA Announces Q4 2005 Results

PRESS RELEASE

For immediate release 01 March 2006

PLIVA Announces Q4 2005 Results A Challenging Year Marked by Significant Restructuring and Consolidation

Highlights

Q4 2005 . Group Revenue down 19% to USD 264m  Royalties down 71% to USD 18m following expiry of US Azithromycin patent on November 1st  Continuing operations sales flat at USD 241m . Generics sales up 13% to USD 209m led by the US +41%, WE +14% and Russia +20% . Group EBIT down at USD 1m excluding restructuring charges of USD 74m related to proprietary exit and manufacturing consolidation  Continuing operations EBIT ex-restructuring down 83% to USD 11m reflecting royalty decline of USD 44m . Generics EBIT ex-restructuring improved at USD 5m . Net loss for the period of USD 41m . VoSpire ER divested for total potential cash consideration of up to USD 67.5m . New bulk azithromycin supply agreement signed with Pfizer

FY 2005 . Group Revenue up 6% to USD 1,197m . Group EBIT down 10% to USD 147m excluding restructuring charges of 123m  Continuing EBIT up 1% at USD 248m ex-restructuring  Generics EBIT up 37% to USD 52m ex-restructuring . Group Net Loss of USD 75m with USD 184m net profit on continuing operations

2006 Outlook . Sales growth of about 10% based on 2005 continuing sales  Generics sales growth of about 15%  Pharma Chemicals sales decline of about 40% . EBITDA of about USD 180m . Proposed 2005 dividend per share of HRK 12.00

1. PLIVA Group Revenue

During 2005, PLIVA announced its intention to exit the proprietary business. This goal was successfully completed following the recent announcement on 14 February 2006 of the sale of PLIVA’s Research Institute to GlaxoSmithKline (GSK). As a result of this decision, PLIVA’s 2005 financial results were affected by significant charges of USD 38m related to remaining proprietary projects which were written off and reclassified as Discontinued Operations in Q4. Following the successful divestment of both SANCTURA® and VoSpire in Q2 and Q4 respectively, PLIVA decided to retain its remaining profitable proprietary products (2005 sales of USD 20m) as they

Since 1921 1 PRESS RELEASE

do not require the support of a dedicated sales team. This portfolio includes the CNS franchise, Custodial, Nystatin and Urecholine; these will be reported as part of the Generics division from 2006. In line with International Financial Reporting Standards, which require companies to clearly separate out continuing business performance, PLIVA therefore reclassified all Research Institute operations (FY 2005 total costs of USD 30m) as Discontinued Operations and CNS sales activities as Continuing Operations. Furthermore, on 26 January 2006, PLIVA announced the achievement of the first milestone in its process of manufacturing consolidation with the divestment of the AWD production plant in Germany. This resulted in a restructuring charge of USD 22m, mainly related to asset impairment. On 01 November 2005, PLIVA’s US azithromycin patent expired, which also strongly affected profitability levels of both the Group and Continuing Operations. The impact was the largest in Q4 with royalties decreasing 71% compared to last year. Consequently, the focus, when commenting profitability margins within these Q4 and FY 2005 results, will be on continuing operations excluding, the impact of both restructuring charges and royalties.

Q4 2005 – Total Group

PLIVA Group reported total revenue of USD 264m, down 19% over the same period last year, with total sales of USD 240m (-1%) for the quarter. The expiry of the US azithromycin patent on 01 November 2005 caused the largest negative impact on the Group’s performance, resulting in a 71% fall in royalty revenues to USD 18m, and was further aggravated by the decline in sales of bulk azithromycin. The Discontinued proprietary division recorded no sales following the divestment of VoSpire. Other income decreased 72% to USD 6m mainly due to one-time gains booked in Q4 2004.

Q4 2005 – Continuing Operations

Continuing operations revenues of USD 266m decreased 18% with sales flat at USD 241m (CER1 +5%), resulting from the lower US royalty stream and reduced bulk azithromycin orders from Pfizer. The Generics division sales contributed USD 209m or 79% to total continuing revenue and registered good sales growth of 13% (CER +18%), driven by especially strong performances in the USA, Western Europe and Russia. Overall sales growth in Central and Eastern Europe (CEE) was 3% (CER +7%) in the period, with Russia posting another impressive quarter with sales up 20% to USD 18m. PLIVA’s sales in Croatia increased 1% (CER +8%) to USD 31m, while sales in Poland slightly declined by 2% (CER 0%) to USD 28m. Western Europe (WE) was again strong with sales of USD 52m, up 14% (CER +24%) against the previous year. Growth was encouraging right across the board; Germany +10% to USD 32m (CER +20%), Spain +28% to USD 4m (CER +39%), the UK +22% to USD 7m (CER +30%) and Italy +12% (CER +22%) to USD 7m. Sales of PLIVA’s US generics business displayed excellent growth increasing 41% to USD 52m. During the quarter, PLIVA also received FDA approval for four ANDAs including azithromycin, which it launched in December. During the quarter, sales of Pharma Chemicals' division were adversely affected by decreased sales of bulk azithromycin which followed a strong performance during the first nine-month period. Strongly hit by decreased bulk azithromycin orders, the Pharma Chemicals division sales were down 55% to USD

1 CER = Constant Exchange Rate

15m. Non Core sales, including Animal Health and Agrochemicals and DDDI, remained flat at USD 13m.

FY 2005 – Total Group During the period, total revenue increased 6% to USD 1,197m, and total sales were up by 9% (CER +7%) to USD 999m. Continuing operations sales of USD 976m accounted for the majority of Group sales at 98%, while discontinued operations recorded a 6% decrease in sales to USD 23m. Royalties of USD 160m represented 13% of total Group revenues, down 6% versus the previous year. Other Income included one-time income from the property sale in Q2 and USD 5m payments from Barr and Legacy each, decreasing 11% to USD 38m as a result of the exceptional items booked in the previous year.

FY 2005 – Continuing Operations

Continuing operations revenues grew 6% to USD 1,174m, of which sales accounted for USD 976m, an increase of 9% (CER +8%) over the same period last year. Generics sales were up 13% (CER +11%) to USD 771m, representing 79% of total continuing operations sales. The strong growth trend across all WE markets continued throughout the period with the region up 26% (CER +26%) delivering sales of USD 199m. Most noteworthy contributions were recorded in Germany with sales up 18% (CER +18%) at USD 121m, followed by the UK +35% (CER +37%) to USD 25m, Italy +37% (CER +38%) to USD 24m and Spain +45% (CER +43%) to USD 21m. CEE sales increased 7% (CER +4%) to USD 396m with mixed performances among PLIVA’s key markets: Russia delivered an exceptional performance with sales up 46% to USD 65m, while Croatia remained stable (CER -2%) with sales of USD 132m. Sales in Poland increased 5% (CER –7%) to USD 91m. Following substantial price cuts towards the end of Q3 2004, strong sales growth in PLIVA’s US generics business during the second half of the year resulted in overall sales growth of 14% to USD 176m. During the year, 28 new molecules were launched across PLIVA’s key markets, bringing total new product sales from 2004/2005 launches to 9% of total generics sales. PLIVA also submitted 61 different molecules for registration, of which 53 were for CEE, 21 for WE and 8 for the US. With sales of USD 127m, the Pharma Chemicals division recorded growth of 2% versus FY 2004 while Non Core divisions recorded sales of USD 56m, an increase of 5% over the prior period.

2. PLIVA Group Profitability

Q4 2005 – Total Group

Following the USD 44m drop in royalties and lower sales of bulk Azithromycin during the quarter, Group Gross profit decreased 30% to USD 127m, maintaining a stable ex-royalty margin of 44%. General and Administrative costs (G&A) of USD 37m decreased by 2% while Sales and Distribution costs (S&D) dropped by 21% to USD 61m as a result of the divestment of commercial proprietary operations in the US during the first half of the year. Research and Development costs (R&D) decreased 13% to USD 28m remaining at a stable 12% of revenues excluding royalties.

During the quarter, PLIVA incurred Restructuring costs of USD 74m, of which USD 42m were related to discontinued proprietary operations. For the most part, these represented non-cash charges of USD 38m related to write-offs of discontinued proprietary projects with an additional USD 4m for other divestment related charges. Depreciation and Amortization costs (D&A) increased USD 48m to USD 77m as a result of these exceptional impairment and write-off charges during the period. Excluding restructuring charges, Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) decreased 58% to USD 25m with a 3% ex-royalty margin. On the same basis, Earnings Before Interest and Tax (EBIT) decreased 96% to USD 1m. The Group posted a net foreign exchange gain of USD 2m and net financial expense of USD 5m resulting in an Earnings Before Tax (EBT) loss of USD 76m. After a gain on sale of discontinued operations of USD 23m which resulted from the divestment of VoSpire ER, PLIVA posted a Net Loss of USD 41m, resulting in a reported Earnings per share (EPS) loss of HRK 14.69 and Earnings per GDR (EPGDR) loss of USD 0.47.

Q4 2005 – Continuing Operations Gross profit decreased 28% to USD 129m reflecting a sharp drop in royalties and lower contribution of the Pharma Chemicals division. However, the gross margin remained flat at 45% on an ex-royalty basis. G&A costs decreased slightly by 1% to USD 34m, while S&D costs rose 7% to USD 61m increasing to 25% of revenues on an ex-royalty basis, resulting from increased promotional activities on key markets. R&D costs were up 3% to USD 23m or 10% of revenues excluding royalties, with proprietary related R&D expenses minimized following on from the decision to shift focus entirely on the development of generics. Total Restructuring charges amounted to USD 32m, of which USD 22m were predominantly related to the impairment of the AWD production facility, while USD 10m were associated with the optimization of PLIVA’s remaining asset base. The Generics division reported an improved EBIT of USD 5m and a 2% margin, excluding USD 23m of restructuring charges primarily related to AWD. The fall in bulk azithromycin sales was the primary reason behind the 74% reduction in Pharma Chemicals EBIT, which excluding restructuring charges of USD 5m, slipped to USD 4m. Continuing Proprietary division EBIT was USD 17m, down by 75%, reflecting decreased US azithromycin royalties from Pfizer. Non Core division contributed a negative USD 2m to continuing EBIT. D&A costs increased 61% to USD 45m due to asset impairment charges arising from the divestment of the AWD plant. Without effects of restructuring, Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) decreased by 62% to USD 34m and 6% of revenues excluding royalties. On the same basis, continuing EBIT decreased 83% to USD 11m with a negative ex–royalty margin. EBT amounted to negative USD 25m and Net Income to negative USD 13m. As a result, continuing operations recorded an EPS and EPGDR loss of HRK 4.62 and USD 0.15 respectively.

FY 2005 – Total Group Group Gross profit remained flat at USD 658m, which excluding royalties represented a gross margin of 48%, down from 50% in 2004. This was the result of the changed product mix, increased manufacturing consolidation costs and higher product amortization, including SANCTURA® amortization of USD 13m for the H1 period. The Group recorded a 10% decrease in EBIT of USD 147m excluding restructuring charges of USD 123m of which a cumulative USD 82m refer to discontinued operations.

Foreign exchange gains amounted to USD 2m during the period, bringing PLIVA Group EBT to USD 7m or 1% margin, while net financial expenses increased to USD 20m as a result of increased inter- bank market rates. Following a USD 77m loss on the sale of discontinued operations, Net Loss for the period amounted to USD 75m with an EPS and EPGDR loss for the period of HRK 26.96 and USD 0.86 respectively.

FY 2005 – Continuing Operations Gross profit of USD 660m was up 5% with a stable ex-royalty margin of 49%. Excluding restructuring charges of USD 41m EBIT increased 1% to USD 248m with a slightly improved ex-royalty margin of 9%. Despite the challenging market conditions on PLIVA’s key markets, excluding Restructuring costs of USD 29m, Generics EBIT increased 37% to USD 52m with a 7% margin while on the same basis Pharma Chemicals’ contribution increased 8% from the previous year to USD 54m. Continuing proprietary operations EBIT, including royalties and sales of the remaining proprietary products, decreased 5% to USD 171m and an increased margin of 92%. Non-Core improved its performance over the last year and added USD 1m to operating profit. EBT decreased 15% to USD 189m and a 16% margin, while Net Income yielded USD 184m, resulting in EPS of HRK 61.55 and EPGDR of USD 2.11.

3. Investments and Financial Position

Cash flow from operations yielded USD 225m in cash during the year 2005, while investing activities drew a net USD 29m on cash after USD 69m in capital expenditures. Following the repayment of interest bearing loan and payment of dividends, financing activities resulted in a cash draw of USD 107m, bringing PLIVA’s net cash position to USD 297m at the end of the period. PLIVA Group’s total assets decreased 15% to USD 1.7bn with non-current assets down 31% to USD 775m, resulting from the divestments of SANCTURA® and VoSpire ER, and the write-off of discontinued operations assets. Current assets increased 7% to USD 900m with the increased cash position, and the reclassification of Research Institute assets as assets available for sale. Total liabilities were down by 14% to USD 625m with non-current liabilities decreasing 11% to USD 250m and current liabilities decreasing 15% to USD 374m as a result of reduced interest bearing debt and trade payables positions. Shareholders' equity was 15% lower than in December 2004 at USD 1.1bn bringing PLIVA’s net debt position to USD 27m, a decreased debt to equity ratio of 31% and a net debt to equity ratio of 3%. As a result, PLIVA Group’s net working capital was up by 31% at USD 526m showing an improved liquidity position with the current and quick ratios increasing from 2.1 and 1.3 to 2.4 and 1.8, respectively.

4. Other

As a part of its generic refocus, PLIVA divested its proprietary operations including two of its largest products SANCTURA® and VoSpire. By divesting its proprietary Research Institute in Zagreb in mid February 2006, PLIVA completed its strategic objective of exiting the proprietary segment. In Q2 2005 PLIVA completed the divestment of SANCTURA® to Esprit Pharma, and received an upfront payment of USD 45m upon closing. PLIVA is also entitled to receive additional contingent payments of up to USD 95m, related to four commercial sales milestones.

In Q4 2005, PLIVA completed the divestment of VoSpire for a total payment of USD 32m upon closing, as well as the right to additional potential payments of up to USD 35.5m for the achievement of certain milestones. On 26 January 2006, PLIVA announced the sale of its German manufacturing plant to the Menarini Group. The closing of the transaction is expected to occur within six months and is subject to the completion of specific terms and conditions. PLIVA has already started transferring production from the AWD plant to its Eastern European facilities, which is expected to deliver savings from 2007 and should be completed by 2008. On 14 February 2006, PLIVA also announced the sale of its Research Institute to GlaxoSmithKline (GSK). Under the terms of the agreement, PLIVA will receive an upfront payment of USD 35m in addition to potential payments of up to USD 15m, conditional on the entry of certain early stage projects into clinical development. In addition, PLIVA will receive contingent royalty-based consideration pending commercialization of certain assets. The closing of the transaction is expected to occur during April 2006, subject to obtaining necessary regulatory approvals, and should result in a respective book gain of about USD 20m in the same period.

5. 2006 Outlook

PLIVA's performance in 2006 will significantly be impacted by a strong decline in royalty income due to the expiry of PLIVA's azithromycin patents in the US (November 2005), Japan (November 2006), major Western European markets (April 2006) and Italy (April 2009). Terms of the new bulk supply agreement for azithromycin with Pfizer will also have a negative impact on performance in relation to previous years. Full proprietary R&D costs savings will be visible following the closing of the deal with GSK for the Research Institute, which is expected in April 2006. As a result, PLIVA expects total sales growth of about 10% based on the performance of Continuing operations in 2005. The driver of this sales growth will be the Generics division, whose sales should grow by about 15%, while Pharma Chemicals sales should decline by about 40% due to lower sales of bulk azithromycin. PLIVA expects to achieve an EBITDA level of about USD 180m, following the strong drop in royalty income and an effective tax rate in the range of 10-15% on 2006 earnings. PLIVA Group’s Management Board has proposed a 2005 dividend per share of HRK 12.00, in line with the last year’s dividend. * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *

PLIVA will host a conference call/webcast today on 01 March 2006 to discuss its Q4 & FY 2005 results at 14:00 GMT (09:00 EST). To join the conference call, please dial + 44 20 7365 8426 or + 1 617 614 3944 from the US and quote PLIVA. A replay facility will be also available by telephone for one week at + 44 20 7365 8427 or + 1 617 801 6888, passcode 92310520. You will also be able to access the call in a 'listen only' mode via the Internet on PLIVA's Company website at www.pliva.com. Please log on to the web and register for the event approximately 10 minutes prior. A replay of the webcast will also be available via the company website.

Calendar of upcoming events*

Q1 2006 Results...... 11 May 2006

Annual General Meeting...... 14 June 2006

Q2 & H1 2006 Results...... 07 September 2006

Q3 & 9M 2006 Results...... 09 November 2006

* This is a provisional timetable as at the time of this release, which is subject to possible changes. For an up-to- date calendar, please refer to our website: www.pliva.com

For additional information, please contact:

Marija Mandić Executive Director Investor Relations and Corporate Communications Tel: +385 1 6160 355, 6120 909 Fax: +385 1 6114 413 E-mail: [email protected]

This release contains certain "forward-looking statements", relating to the Group's business, which can be identified by the use of forward-looking terminology such as "will", "planned", "expectations", "forecast" or similar expressions, or by discussions of strategy, plans or intentions. Such statements include descriptions of new products expected to be introduced or have been introduced by the Group companies and anticipated customer demand for such products. Such statements reflect the current views of the Group with respect to future events and are subject to certain risks, uncertainties and assumptions. Many factors could cause the actual results, performance or achievements of the Group to be materially different from any future results that may be expressed or implied by such forward-looking statements.

APPENDIX 1. I. PLIVA Group Profitability

FY FY Q4 Q4 PLIVA GROUP +/- % +/- % 2005 2004 2005 2004 (USD m) Revenue 1,197.1 1,130.1 5.9 263.6 325.7 -19.1 Gross profit 658.4 649.3 1.4 127.1 180.6 -29.6 Gross margin 55.0% 57.5% 48.2% 55.4% EBITDA 190.9 267.9 -28.7 3.9 58.6 -93.4 EBITDA margin 15.9% 23.7% 1.5% 18.0% EBIT 24.8 164.5 -84.9 -72.8 30.2 - EBIT margin 2.1% 14.6% - 9.3% EBIT ex restructuring 147.4 164.5 -10.4 1.3 30.2 -95.8 EBIT ex restructuring margin 12.3% 14.6% 0.5% 9.3% Net Loss/(profit) -75.1 127.5 - -41.0 20.2 - Net Margin - 11.3% - 6.2%

II. PLIVA GROUP Divisional Profitability FY FY Q4 Q4 Division (USD m) +/- % +/- % 2005 2004 2005 2004 Generics Revenues 795.7 704.1 13.0 214.3 192.8 11.1 Operating profit, ex restructuring 51.6 37.7 37.1 4.7 -23.5 - Operating margin, ex restructuring 6.5% 5.4% 2.2% - Operating profit 22.4 37.7 -40.6 -18.0 -23.5 - Operating margin 2.8% 5.4% - - Proprietary (Continuing) Revenues 185.0 201.0 -7.9 22.7 70.1 -67.7 Operating profit, ex restructuring 171.0 180.4 -5.2 16.5 66.3 -75.2 Operating margin, ex restructuring 92.4% 89.8% 72.7% 94.5% Operating profit 171.0 180.4 -5.2 16.5 66.3 -75.2 Operating margin 92.4% 89.8% 72.7% 94.5% Proprietary (Discontinued) Revenues 23.0 24.4 -5.5 -1.9 3.9 - Operating loss, ex restructuring -100.5 -79.6 - -9.5 -31.1 - Operating margin, ex restructuring - - - - Operating loss -182.3 -79.6 - -51.5 -31.1 - Operating margin - - - - Pharma Chemicals Revenues 126.7 123.6 2.5 14.6 32.2 -54.5 Operating profit, ex restructuring 53.7 49.7 8.1 3.9 14.9 -74.2 Operating margin, ex restructuring 42.4% 40.2% 26.3% 46.3% Operating profit 47.9 49.7 -3.6 -1.0 14.9 - Operating margin 37.8% 40.2% - 46.3% Non-Core Revenues 57.4 55.3 3.8 13.1 13.3 -1.1 Operating profit/(loss), ex restructuring 0.9 -1.4 - -1.9 -2.7 - Operating margin, ex restructuring 1.6% - - - Operating profit/(loss) 0.6 -1.4 - -2.0 -2.7 - Operating margin 1.1% - - - Other Revenues 9.3 21.8 -57.4 0.8 13.4 -94.4 Operating loss, ex restructuring -29.3 -22.2 - -12.4 6.3 - Operating margin, ex restructuring - - - 47.0% Operating loss -34.7 -22.2 - -16.7 6.3 - Operating margin - - - 47.0%

III. PLIVA Group Sales

PLIVA FY FY Q4 Q4 (USD m) +/- % +/- % GROUP 2005 2004 2005 2004 GENERICS*: 770.5 681.2 13.1 209.1 184.6 13.2 CEE 395.9 369.8 7.1 105.5 102.6 2.9 Croatia 131.5 131.7 -0.2 30.6 30.2 1.3 Poland 91.0 86.6 5.1 27.5 27.9 -1.5 Russia 65.2 44.6 46.1 17.6 14.7 20.2 Other 108.2 106.8 1.3 29.8 29.8 0.0 USA 175.5 153.7 14.2 52.0 36.9 40.9 Western Europe 199.1 157.7 26.3 51.6 45.2 14.2 Germany 121.0 102.7 17.9 31.6 28.7 10.1 Spain 20.8 14.3 45.0 3.9 3.0 27.7 UK 25.4 18.8 35.0 6.9 5.7 21.7 Italy 24.3 17.7 37.4 7.4 6.6 11.7 Other 7.6 4.2 82.2 1.8 1.1 59.6

PROPRIETARY: 42.8 55.5 -22.9 2.4 11.4 -78.7 Continuing 19.8 31.1 -36.6 4.3 7.5 -42.7 Discontinued 23.0 24.4 -5.5 -1.9 3.9 -147.4

PHARMA CHEMICALS 126.5 123.6 2.4 14.6 32.2 -54.6

NON CORE 56.3 53.6 5.1 12.9 12.8 0.3

OTHER 3.2 4.3 -25.3 0.4 1.0 -54.3

TOTAL SALES 999.3 918.1 8.9 239.5 242.0 -1.1 *Includes ROW Sales of USD 3.6m (FY 2005) and USD 1.2 m (Q4 2005)

APPENDIX 2. I. PLIVA Group – FY Consolidated Income Statement

in USD m FY 2005 FY 2004

Discontinued 05/04 Continuing Discontinued Total Continuing (restated) Total +/- %

Sales 976.3 23.0 999.3 893.7 24.4 918.1 8.9

Royalties 160.3 0.0 160.3 169.8 0.0 169.8 -5.6

Other revenue 37.5 0.0 37.5 42.3 0.0 42.3 -11.2

Total Revenue 1,174.1 23.0 1,197.1 1,105.8 24.4 1,130.1 5.9

Costs of goods sold* 514.0 24.7 538.7 475.3 5.5 480.8 12.0

Gross profit 660.1 -1.7 658.4 630.5 18.8 649.3 1.4

General and administrative costs 120.6 10.2 130.7 110.4 15.6 126.0 3.8

Research and development costs 73.6 23.9 97.5 66.2 33.7 99.9 -2.4

Sales and distribution costs 218.1 64.8 282.8 196.1 49.1 245.2 15.3

Goodwill Amortization 0.0 0.0 0.0 13.2 0.6 13.8 -

Restructuring Costs 40.8 81.8 122.6 0.0 0.0 0.0 -

EBIT 207.1 -182.3 24.8 244.7 -80.2 164.5 -84.9

Net foreign exchange gains 2.1 0.0 2.1 -1.5 0.0 -1.5 -

Net financial expenses 21.2 0.0 21.2 22.2 0.0 22.2 -4.4

Share of loss of associate 0.8 0.0 0.8 -0.2 0.0 -0.2 -

Profit before tax 188.7 -182.3 6.5 220.7 -80.2 140.6 -95.4

Income tax expense 5.1 0.0 5.1 13.0 0.0 13.0 -60.7 Loss on sale of discontinued operations 0.0 76.5 76.5 0.0 0.0 0.0 -

Net loss/(profit) for the period 183.7 -258.8 -75.1 207.7 -80.2 127.5 -

Earnings per share (HRK) 61.55 -26.96 71.73 44.08

Earnings per GDR (USD) 2.11 -0.86 2.39 1.47

1 USD (average) = HRK 5.948 6.036

*Cost of goods sold was aligned with industry practice and includes amortization and impairments of product rights, patents and trademarks. This charge had previously been recognized in Research and Development expenses. This has resulted in the reclassification from R&D to COGS for FY 2005 of USD 29.7m (USD 20.5m relates to Proprietary and USD 9.2 to Generics)and for FY 2004 of USD 15.2m (USD 8.4 relates to Proprietary and USD 6.8 to Generics).

II. PLIVA Group – Q4 Consolidated Income Statement

in USD m Q4 2005 Q4 2004

Discontinued 05/04 Continuing Discontinued Total Continuing (restated) Total +/- %

Sales 241.3 -1.9 239.5 238.1 3.9 242.0 -1.1

Royalties 18.4 0.0 18.4 62.6 0.0 62.6 -70.7

Other revenue 5.8 0.0 5.8 21.0 0.0 21.0 -72.4

Total Revenue 265.5 -1.9 263.6 321.8 3.9 325.7 -19.1

Costs of goods sold* 136.3 0.1 136.5 142.6 2.6 145.1 -6.0

Gross profit 129.1 -2.0 127.1 179.2 1.4 180.6 -29.6

General and administrative costs 34.0 2.5 36.5 34.5 2.6 37.2 -1.8

Research and development costs 23.4 5.0 28.3 22.8 9.8 32.5 -12.9

Sales and distribution costs 60.9 0.1 61.0 57.0 20.1 77.1 -20.9

Goodwill Amortization 0.0 0.0 0.0 3.4 0.1 3.6 -

Restructuring Costs 32.0 42.0 74.1 0.0 0.0 0.0 -

EBIT -21.3 -51.5 -72.8 61.4 -31.2 30.2 -

Net foreign exchange gains/losses 2.0 0.0 2.0 -4.1 0.0 -4.1 -

Net financial expenses 5.7 0.0 5.7 7.6 0.0 7.6 -25.0

Share of loss of associate 0.5 0.0 0.5 0.0 0.0 0.0 -

Loss/(profit) before tax -24.5 -51.5 -76.0 49.7 -31.2 18.5 -

Income tax expense -11.7 0.0 -11.7 -1.7 0.0 -1.7 -

Loss on sale of discontinued operations 0.0 -23.4 -23.4 0.0 0.0 0.0 -

Net loss/(profit) for the period -12.9 -28.1 -41.0 51.4 -31.2 20.2 -

Earnings per share (HRK) -4.62 -14.69 16.85 6.61

Earnings per GDR (USD) -0.15 -0.47 0.59 0.23

1 USD (average) = HRK 6.21 5.84

*Costs of goods sold was aligned with industry practice and includes amortization and impairments of product rights, patents and trademarks. This charge had previously been recognized in Research and Development expenses. This has resulted in the reclassification from R&D to COGS for Q4 2005 of USD 5.6m (USD 2.9m relates to Proprietary and USD 2.7 to Generics) and for Q4 2004 of USD 4.2m (USD 2.1 relates to Proprietary and USD 2.1 to Generics).

APPENDIX 3. PLIVA Group – Balance Sheet

31/12/2005 31/12/2004 USDm USDm ASSETS NON-CURRENT ASSETS Property , plant and equipment 510.6 638.2 Intangible assets 214.1 423.0 Investment in associate 9.8 11.4 Other investment 0.9 2.1 Receivables 4.4 8.3 Deferred tax assets 35.5 40.7 TOTAL NON-CURRENT ASSETS 775.2 1,123.7

CURRENT ASSETS Inventories 214.2 251.3 Trade and other receivables 364.7 407.6 Income tax receivable 2.8 16.5 Other investments 3.4 0.3 Bank deposit 0.0 0.1 Cash and cash equivalents 296.9 167.9 Assets classified as held for sale 18.4 - TOTAL CURRENT ASSETS 900.4 843.7

TOTAL ASSETS 1,675.6 1,967.4

EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT Share capital 359.9 359.9 Share premium 10.2 9.4 Treasury shares -15.6 -16.0 Legal and other reserve 24.6 18.6 Translation reserve 16.1 98.7 Fair value reserve: available for sale financial assets 0.1 0.1 Equity share options issued 3.4 2.2 Retained earnings 647.4 764.7

Equity attributable to PLIVA d.d. shareholders 1,046.0 1,237.5 Equity attributable to MINORITY INTEREST 5.1 5.7 TOTAL EQUITY 1,051.1 1,243.2

LIABILITIES NON CURENT LIABILITIES Interest bearing loans and borrowings 223.5 262.5 Deferred tax liabilities 0.2 0.8 Employee benefits 15.6 16.5 Provisions 5.9 2.1 Other non-current liabilities 5.0 0.1 TOTAL NON-CURRENT LIABILITIES 250.2 281.9

CURRENT LIABILITIES Trade and other payables 234.2 255.5 Interest bearing loans and borrowings 103.8 172.6 Employee benefits 3.3 3.9 Provisions 26.0 7.8 Liabilities classified as held for sale 2.6 - Income tax payable 4.5 2.5 TOTAL CURRENT LIABILITIES 374.4 442.3

TOTAL LIABILITIES 624.6 724.3

TOTAL EQUITY AND LIABILITIES 1,675.6 1,967.4 *Certain amounts as at 31 December 2004 have been restated to conform with presentation in 2005

APPENDIX 4. PLIVA Group – Cash Flow Statement

2004 2005 restated USDm USDm Cash flow from operating activities Operating profit 24.8 164.5 Adjustments for: Depreciation 68.0 66.8 Amortisation 35.8 36.9 Impairment 62.2 - Profit on sale of property, plant and equipment and intangible assets -1.6 -1.9 Profit on sale of subsidiary -4.3 - Inventory provision 6.1 5.6 Share options given 1.8 1.7 Other non-cash income and expenses 11.8 16.5

Operating profit before working capital changes 204.6 290.2 Decrease/(increase) in inventories 30.5 -49.7 Decrease/(increase) in receivables 54.2 -0.2 (Increase)/decrease in payables -21.1 12.1 Impact on working capital of foreign exchange rate changes -29.0 34.4

Cash generated by operations 239.3 286.8 Income taxes received/(paid) 15.2 -27.7 Interest and other financial charges paid -29.9 -25.1

Net cash from operating activities (continuing activities) 358.8 310.2 Net cash used in operating activities (discontinued activities) -134.2 -76.1 Net cash from operating activities (total) 224.6 234.0

Cash flow from investing activities Purchase of property, plant and equipment -32.3 -53.8 Purchase of intangible assets -37.1 -177.1 Proceeds from sale of property, plant and equipment and intangible assets 76.1 9.8 Proceeds from sale of subsidiary 7.9 - Change in loans given 8.1 1.0 Net purchase of marketable securities and investments -3.3 -0.1 Interest and other income received 9.7 5.7

Net cash used in investing activities (continuing activities) -39.8 -64.6 Net cash from investing activities (discontinued activities) 68.9 -150.0 Net cash from/(used in) investing activities (total) 29.1 -214.6

Cash flow from financing activities Proceeds from sale of treasury shares 1.1 1.9 Bonds issued - 89.0 Proceeds/(repayment) of long-term interest bearing loans and borrowings 36.5 -63.4 (Repayment)/proceeds of short-term interest bearing loans and borrowings -108.2 29.3 Dividends paid -36.7 -46.1

Net cash used in/from financing activities (continuing activities) -107.2 10.7 Net cash from financing activities (discontinued activities) - - Net cash used in/from financing activities (total) -107.2 10.7

Effects of foreign exchange rate changes on cash and cash equivalents -17.4 11.0

Net increase in cash and cash equivalents 129.0 41.2 Cash and cash equivalents at the beginning of the year 167.9 126.7 Cash and cash equivalents at the end of the year 296.9 167.9

Since 1921 14