CEO Meets Investor

December 10, 2010 Riga 2 What is Olainfarm? One of the leading pharmaceutical companies in the Baltic States

• Olainfarm, established in 1972, is one of the leading Sales growth pharmaceutical companies in Baltic States employing more than 750 highly qualified 40 000 35% professionals; 35 000 30% 30 000 25% 25 000 • Produces both Finished Dosage Forms (FDFs) and 20% LVL '000 full cycle Active Pharmaceutical Ingredients (APIs) 20 000 EUR '000 15% Growth rate • Primarily branded and historically unique 15 000 10 000 10% “generics”; 5 000 5% • About 75% of FDFs produced from own APIs; - 0% 2005 2006 2007 2008 2009 2010F • Certified in accordance with the requirements of the EU Good Manufacturing Practice (GMP), U.S. Food and Administration GMP in API Mission manufacturing, and environmental management To manufacture reliable and effective high quality systems standard ISO 14001; pharmaceutical products to the whole world in an environmentally friendly way and in a fair and effective • After privatization in 1997 were listed on the Baltic cooperation with customers . Secondary List Vision • Since 2006 in NASDAQ OMX Baltic Main To become the leading manufacturer of finished dosage List; forms and chemical-pharmaceutical products in the Baltic • Capitalization as of December 2010, – EUR 40 States . million; 3 Corporate milestones 38 years of growth

2009 Record sales and profits achieved in falling markets, as marketing effort pays back .

2008 More aggressive approach to marketing taken, bringing the company to significant loss . New product and market strategy approved, planning launch of 5 potential besesellers; Company moved to the 2006 Official list of Riga .

2004 A major reconstruction of the production plant completed and EU Good Manufacturing Practice certificate obtained .

Obtained a certificate of conformity to the requirements of U.S. Food and Drug Administration in API 2002 manufacturing . A certificate of conformity to the requirements of environmental management systems standard ISO 14001 2001 obtained . The state enterprise Olaine Chemical-Pharmaceutical Plant privatized and reorganized to the joint-stock company 1997 OlainFarm and subsequently listed on the stock exchange. After collapse of refocuses to selling specialty synthesis (Adamantane, Quinuclidone and other 1991 derivatives) to the western countries.

1980 Commenced production of finished dosage forms .

Olaine Chemical-Pharmaceutical Plant becomes one of the main suppliers of active chemical ingredients and 1976 intermediaries to all the existing factories-producers within the Eastern block .

1972 Foundation of OlainFarm (at that time Olaine Chemical-Pharmaceutical Plant). 4 Main products Emphasis on branded generics Sales by Products, 9 Months, 2010

• Product portfolio is well diversified with main Other products emphasis on branded generics, historically unique Furagin Remantadine 12% to OlainFarm: 2% 3% Neiromidin • In total more than 70 names; Furadonin 22% • 9 best-selling products account for 85% of 3% sales. MAG • The main products are: 4% • Neiromidin: Cholinesterase inhibitor, Etacizin Noofen stimulant of neuromuscular transmission; 8% 14% Adaptol • Noofen: mood elevator, tranquilizer; Furamag 10% Fenkarol OlainFarm owns cost efficient synthesis; 11% 11% • Fenkarol: antihistamine with negligible side effects; unique to OlainFarm; • Furamag: one of original nitrofurantoine derivatives, applied to treat urinary infections; • Adaptol: adaptogenic product, daytime tranquilizer. • Optimization of product portfolio under way, three potential best-sellers to be added in the upcoming years, memantine and meldonium already among top 12. 5 Main markets Focus on home market and the CIS Sales by Countries, 9 Months, 2010 • Sales to 30 countries, but main focus on home market and the CIS Other countries 1% 1% • About 95% of sales is export; 2% 6% Georgia • Over 300 medical representatives in key markets; 3%

• Representative offices in , , , UK , , , , contracted agents 4% Russia in USA and ; 47%

• Significant investments in marketing in Russia started in Kazakhstan 2008; 5% • Significant decrease only in ; Latvia 6% • Registration and opening of rep-offices under way in Belarus Ukraine countries of SE Asia, Central Asia and SE Europe. 10% 15%

Existing markets Near future prospects Under consideration 6

Recent history Net Profit in 9 Months, thsnd

Continuous sales growth 5 000 4 000 • Sales grow since 2002; 3 000 2 000 LVL 1 000 • Since 2006 sales have increased by more than EUR 65%; - 2006 2007 2008 2009 2010 -1 000 -2 000 • Current net profit is eight times that of 2006; -3 000

• Annual target profit of 2010, that was described as optimistic, is actually exceeded in 9 months. Sales in 9 Months, thsnd.

30 000

25 000

20 000

15 000 LVL EUR

10 000

5 000

- 2006 2007 2008 2009 2010 7 Trading of shares Among the market leaders Share Trading Volumes at NASDAQ OMX Riga, • In monetary terms turnover of shares in 9 months of mln. 2010 higher than in entore 2009 and 2008 combined; 8 Since the bbeginning of the year the share price has 7 • 6 Number of shares increased by 115%. 5 LVL EUR • Increase in price of OlainFarm’s shares significantly 4 3 utperforms that of OMXRiga un OMX Baltic 2 Benchmark indices. 1 0 2006 2007 2008 2009 2010 3/4 8 What is next generation OlainFarm? Olainfarm future plans

• Products • Finalize the launch of group of five new products; • Continue work on identification of improved versions, combinations or optic isomers of known molecules with particular focus on antivirals and CNS medicines; • Continue efforts to identify cooperation opportunities regarding production of APIs, with emphasis on multinational partners. • Countries • Strengthening the existing positions in Central Asian countries of the former Soviet Union; • Expansion into South East Asian and South East European countries; • Consider cooperation schemes with Chinese, Indian, Nordic and South American companies. • Marketing • Conduct post-marketing studies to strengthen the sales of existing products and existing markets; • Establish networks of medical representatives in new markets; • Conduct post-marketing studies and trials on new products.

• Outcomes • Stable two digit organic sales growth per annum; • Diversity of products and markets keeps company safe from major product/country failures; • OlainFarm remains independent while exporing and exploiting industry consolidation opportunities. 9 Financial summary Way to stabilisation

(EUR’000) 2004 2005 2006 2007 2008 2009 Sales 15,193 18,476 23,768 26,982 28,580 31,931 EBITDA 1,460 3,766 4,832 4,660 2,302 7,985 EBIT -243 1,248 2,046 1,527 -1,334 4,765 Net profit -1,134 899 1,107 478 -2,045 3,362

Assets 26,270 27,353 36,098 40,824 45,047 43,482 incl. cash 50 149 122 1,535 53 260 Equity 12,696 13,596 19,119 23,043 20,986 24,348 Liabilities 13,574 13,757 16,979 17,781 24,061 19,134 incl. interest-bearing liabilities 7,820 7,353 10,118 11,925 12,544 8,505

Sales growth n.a. 21.6% 28.6% 13.5% 5.9% 11.2% EBITDA margin 9.6% 20.4% 20.3% 17.3% 8.1% 25.0% EBIT margin (1.6%) 6.8% 8.6% 5.7% (4.7%) 14.9% Net profit margin (7.5%) 4.9% 4.7% 1.8% (7.2%) 10.5% Earnings per share (LVL) (0.011) 0.08 0.08 0.03 (0.14) 0.24 ROE (8.9%) 6.6% 5.8% 2.1% (9.8%) 13.8% 10 Recent developments 3/4 % to Growth in falling markets (LVL’000) 3/4 2010 2009 previous Sales 18 839 15 193 124% • In early 2008 OlainFarm hires regional pharma marketing company to do the promotion in Changes to inventory and WIP -675 490 -138% Russia, Moldova, Kazakhstan, Azerbaijan and Other revenues 180 329 55% Uzbekistan; Cost of materials 2 596 2 882 90% • Extensive marketing effort results in more than 2M EUR loss, as the increase in sales does not Cost of personnel 4 430 4 608 96% appear as instantly; Other costs 6 458 5 095 127% • End of 2008 shows increase in sales as a result EBITDA 4 861 3 428 142% of increased marketing; EBITDA margin 26% 23% • As marketing starts delivering, sales considerably higher throughout 2009 and 2010, Depreciation/amortisation 1 367 1 792 76% resulting in record sales combined with record profits; EBIT 3 494 1 636 214% • Marketing continues and so does the sales EBIT margin 19% 11% increase: preliminary figures of 2010 show yet Financial revenues 112 52 215% another increase in sales and as breakeven is comfortably passed, even more significant Financial expenses 238 404 59% increase in profits. Profit before tax 3 367 1 284 262% • During 9 months of 2010 77% of planned sales and 105% of planned profits achieved Profit tax 531 5 10 700% Net proft 2 836 1 279 222% Neto margin 15% 8% Thank you!

JSC Olainfarm 5 Rūpn īcu iela., Olaine, LV-2114, Latvia Phone: +371 67013701 Fax: +371 67013777 www.olainfarm.lv

Investor relations: Salvis Lapi Ħš, Member of the Board Phone.: +371 26448873 e-mail: [email protected]