1. Challenges of Budgeting in Developing Market: Ukraine By S. Thamarai Pandian, Head of Representative office Ukraine & Eastern Europe “Unique Pharmaceutical Laboratories” “PHARMABUDGET – 2011” 27 May 2010

2. Optimizing your financial resources: 4 parameters Income - Gross sales Manufacturing cost – CoGS, freight, insurance, etc. Operational expenses - Rentals, salary, marketing & advertising, etc. Gross Profits!!! Profits!!! Objectives of Budgeting: % of profits & objectives vary from company to company.

3.  Stable markets: Effective long-term planning 3, 5, 10 yrs. Predictable results Very low % of growth  Emerging markets: Very high % growth Predictable results Effective long-term planning 3,5 yrs.  Developing markets: Highly unpredictable, high risk High/low/negative growth Proactive measures Quick decision making Back drop: Various Markets

4. Factors not in our control: Ukraine  Many external factors: Country’s economic conditions Government’s influence in Pharma industry:  Delayed QC issues  Pricing policy  Pandemic “scare”  MOH Budget Global economic conditions EURO Debt bomb Fluctuations of hard currency Seasonality Consumer purchasing behavior Inflation

5. HUGE UNCERTAINITIES …………… Expect the unexpected!!! Current trend: Positive growth of market in volume & units Govt. regulations on medicines, possibility of imposition of VAT Unpredictable, Currency exchange rates New tax regulations…………………..etc., Mid of Financial year: Ukraine

6. Uncertainties: Pharm Market dynamic 2009 – 2010 Data of Farmstandard

7. Uncertainties: Morbidity on influenza in Ukraine. Extremely variable factor (Natural + Governmental)

8. Uncertainties: Exchange Rate Euro/UAH Extremely variable and influencing factor Official Sale purchase 8-6% loss, Sept-Oct.

9. Uncertainties: Exchange Rate USD/UAH within the last year. Extremely variable and influencing factor Official Sale purchase 11-9% loss in Sept.-Oct.

10. Possible scenario’s: Budgeting Expenses have direct relation to gross profit

11. Solutions: 3 F’s Flexibility Fast Focused

12.  Flexibility is key to success  “Contingency fund” for any eventualities  Maximum & Minimum corridor on expected sales  Maximum & Minimum corridor on expenses  Monthly/quarterly monitoring of fixed & variable costs  P/L statement on quarterly basis Solutions: Flexibility

13.  Quick decision making center: Speed of decision Where is the decision making center? If, operations are, profit center, or 100% local owners, decision is faster If, operations are from H.O., or Joint venture, or branch office, or subsidiary, decision delayed… bureaucracy or time consuming procedures Bigger the company or many layers in the management, decision is delayed Solutions: Fast

14. Solutions: Focused  Focused: Achieving objectives: Gross Sales Gross Profits

15. Europe Debt Bomb:  Situation is very fluid & rather alarming in Euro zone countries Greece, Portugal, Spain, Italy & Ireland.  This will stretch the resources of Britain, France and Germany to $2 trillion.  Above 5 countries have a debt of 2 trillion to the rest of the world.  In total, a bubble of 4 trillion may burst any time

17. Thank You!!!!!