#1AZERBAIJAN PHARMACEUTICALS MARKET O azpromo Azerbaijan Export & Investment Promotion Foundation SCIP Sumgait Chemical Industrial Park ais AZERBAIJAN INVESTMENT COMPANY#2VALUE PROPOSITION ✓ DOMESTIC MARKET ✓ PROXIMITY TO LARGE FOREIGN MARKETS ✓ FAVOURABLE BUSINESS CLIMATE ✓ QUALIFIED WORK FORCE e#3DOMESTIC MARKET value proposition#4STATE OF ECONOMY (2015) 5558,7 US$ GDP PER CAPITA 9 705 600 POPULATION GDP 34% 53 6,894.3 MLN US$ EXTERNAL PUBLIC DEBT 12% 10% 8% 20,645.9 MLN US$ TRADE TURNOVER 15,957.0 MLN AZN INVESTMENT INTO FIXED CAPITAL Industry Construction BLN US$ 6% 5% 3% 2% Trade Taxes Agriculture Transport Tourism Telecom Other 19%#5DOMESTIC MARKET OF PHARMACEUTICALS 700 MLN USD 2000 3 MLN USD MARKET SIZE PHARMACIES LOCAL PRODUCTION 1 BLN USD MID-TERM MARKET SIZE PERSPECTIVE 1ST PLACE IN CIS IN TEMRS OF THE NUMBER OF CLIENTS SERVED BY PHARMACIES 185 MLN USD STATE PROCUREMENT OF MEDICINE#6DOMESTIC MARKET OF PHARMACEUTICALS Market value, mln. EUR 2012 2013 2014 386,8 476,3 537,0 Market volume, mln. UNITS (box) 115,3 141,2 190,2 Gross (EUR), % 23% 23% 13% Gross (AZN), % 14% 27% 12% Gross (Units), % -6% 23% 35% AVG price EUR 3,36 3,37 2,82 Generic share (EUR), %* 83,3% 85,2% 86.4% Import Share (EUR), % 97,5% 97,7% 97,9% TOP3 country of supplier (EUR), % GERM, USA, FRA GERM, RF, USA TUR, GERM, RF Russian products Share (EUR), % 7,97% 7,95% 7,61% OTC products share (EUR), % 31,29% 32,76% 32,47%#7DOMESTIC MARKET OF PHARMACEUTICALS Syrups 4% Cream, gel, ointment, liniment, oil, shampoo 6% Capsule 11% Injection+ infusion 27% Suppositories 2% Drops Solution 4% 3% Powders, granules, 3% Spray, aerosoles 2% Suspensions, emulsions 2% Others 2% Tablets 34%#8SANOFI MAJOR SUPPLIERS SANOFI gsk GLAXOSMITHKLINE STADA STADA U NOVARTIS NOVARTIS SERVIER BERLIN-CHEMIE MENARINI GROUP WORLD MEDICINE Pharmaceutical Company Health is a treasure we share WORLD MEDICINE RG GEDEON RICHTER SERVIER Takeda TAKEDA BERLIN-CHEMIE % Mustafa nevzat MUSTAFA NEVZAT#9MAIN DISTRIBUTORS AZERIMED AVROMED ALFAMED PASHA-K LOGHMAN FARM NOVAVITA P VELGA PROFARMA PHARMA-SERVICE#10PROXIMITY TO MARKETS value proposition#11LARGE SURROUNDING MARKETS GLOBAL OUTREACH 50 COUNTRIES WITH 50% OF WORLD CONSUMERS WITHIN 4 HOURS FLIGHT (MEDIUM-HAUL FLIGHT) FREE ACCESS TO CIS + GEORGIA MARKETS OF 270 MIL CONSUMERS AND OVER 1.6 TRILLION US$ GDP TRANSIT HUB AT EAST-WEST, SOUTH-NORTH AND SOUTH-WEST TRANSIT ROUTS UNIQUE ACCESS TO THE UNTAPPED MARKETS OF AFGHANISTAN, IRAQ#12BUSINESS CLIMATE value proposition#13WB DOING BUSINESS REPORT 2016 OVERALL RANKING STARTING A BUSINESS REGISTERING PROPERTY 63/189 7/189 22/189 PAYING TAXES PROTECTING INVESTORS ENFORCING CONTRACTS 34/189 36/189 40/18#14ENABLING BUSINESS ENVIRONMENT REDUCED RED TAPE No state inspections of businesses (except for tax, human health and state security reasons) INVESTMENT CLIMATE No discrimination between foreign and domestic investor Streamlined licensing system (no. of licensed activities - 37, no validity period, low fees, max 10 working days waiting period) No prior authorization of foreign investment required E-Gov services for business (incl. e-registration, e-taxation, e-licensing, e-trade, e- intellectual property, e-payment) The one-stop-shop systems (business registration, customs, construction permits, licensing) No limits on the amount of foreign capital in companies No restrictions on repatriation of profits, foreign exchange and technology transfer#15ENABLING BUSINESS ENVIRONMENT COMPETITIVE TAX REGIME STIMULATION OF EXPORTS Low tax burden No export duties Streamlined procedures. Number of payments (per year) - 7 Time (hours per year) - 195 Export reimbursement system Competitive tax rates Corporate tax - 20%, VAT - 18%, Simplified tax - 4 or 2%, Personal income tax - 14 or 25%, WHT - 10% Export grant scheme Tax holidays Tax holidays for agriculture, industrial and technological parks, holders of investment promotion document Removing trade barriers#16TAX HOLIDAYS HOLDERS OF INVESTMENT PROMOTION DOCUMENT RESIDENTS OF INDUSTRIAL AND TECHNOLOGY PARKS 7 【 YEARS 50% REDUCED CORPORATE TAX 0% LAND AND PROPERTY TAX 0% VAT ON HARDWARE, TECHNOLOGICAL EQUIPMENT AND STRUCTURES IMPORTED BY IPD HOLDERS 0% CUSTOMS DUTY ON HARDWARE, TECHNOLOGICAL EQUIPMENT AND STRUCTURES IMPORTED BY IPD HOLDERS 7 Y E 0% CORPORATE TAX 0% LAND AND PROPERTY TAX 0% VAT ON HARDWARE, TECHNOLOGICAL EQUIPMENT AND STRUCTURES IMPORTED BY RESIDENTS 0% CUSTOMS DUTY ON HARDWARE, TECHNOLOGICAL EQUIPMENT AND STRUCTURES IMPORTED BY RESIDENTS BARS#17INTELLECTUAL PROPERTY PATENT LAW > Invention - 20 yrs. protection (5 yrs. extension possibility) Utility models - 10 yrs. protection ▷ Industrial designs - 10 yrs. protection (5 yrs. extension possibility) > PCT route available Member to: Paris Convention Patent Cooperation Treaty Strasbourg Agreement Budapest Treaty#18PHARMACEUTICALS MARKET REGULATION REGULATORY BODIES MINISTRY OF HEALTH formulates state policy in the field and ensures its implementation MINISTRY OF ECONOMY issues licences, permits, certificates and other documents for various entrepreneurial activities TARIFF (PRICE) COUNCIL in compliance with relevant legislation regulates prices of pharmaceuticals#19PHARMACEUTICALS MARKET REGULATION PRICE REGULATION ▷ In 2015, the Tariff Council adopted the mechanism for calculating the prices of medicines ▷ The mechanism determines the prices for medicines that passed state registration and includes methods for calculating wholesale and retail prices for these medicines. ▷ The Tariff Council identifies base prices by referring to at least 5 out of 10 reference countries (Turkey, France, Italy, Spain, Portugal, Greece, Poland, Hungary, Bulgaria and Slovenia) In determining the cost of medicines, the Council relies on the lowest price established in these countries > The Ministry of Economy controls the observance of established prices#20PHARMACEUTICALS MARKET REGULATION PUBLIC PROCUREMENT ▷ In the framework of various State Programmes, the Ministry of Health insures different types of free medicines for certain illnesses >Annual public procurement of medicines in the framework of various state programmes reaches 185 mln USD ▶166 types of medicine offered in the hospitals and 99 types of medicine distributed to various priviledged groups of population are provided at the cost of the Ministry of Health#21PHARMACEUTICALS MARKET REGULATION CERTIFICATION AND REGISTRATION According to the law on Medicines, State registration of medicines - a system of measures, which envisages an expert assessment of medicines with the purpose of their use in medical practice on the basis of relevant documents and (or) according to the results of tests licensing their manufacture in the Republic of Azerbaijan by the industrial method, their import and application, and also registering them in the established order.#22QUALIFIED WORK FORCE value proposition#23YOUNG AND QUALIFIED WORK FORCE LABOUR MARKET EFFICIENCY PLACE KAZAKHSTAN ‣ LABOUR FORCE = 4.8 MILLION PERSONS APPROX. 40% OF THE POPULATION IS UNDER THE AGE OF 30 ▸ HIGH EMPLOYMENT RATE (95%) ▸ EXTREMELY HIGH LITERACY RATE (99.8%) 30 THOUSAND STUDENTS GRADUATE FROM 51 UNIVERSITY ANNUALLY A LARGE R&D CENTER, THE NATIONAL ACADEMY OF SCIENCES WITH 28 RESEARCH INSTITUTES AZERBAIJAN GEORGIA TAJIKISTAN RUSSIA UKRAINE ARMENIA MOLDOVA KYRGYZSTAN UKRAINE AZERBAIJAN ARMENIA RUSSIA TAJIKISTAN KAZAKHSTAN GEORGIA 2 3 4 15 6 8 9 AVAILABILITY OF SCIENTISTS AND ENGINEERS PLACE KYRGYZSTAN MOLDOVA 2 3 4 5 6 7 8 9 The Global Competitiveness Index 2015-2016#24INVESTMENT PROPOSAL value proposition#25INVESTMENT PROPOSAL >The Ministry of Economy invites pharmacy producers to invest in production of pharmaceuticals in Azerbaijan. ▶Strategic investors would be issued an investment promotion document and subjected to relevant incentives. ▶Full state support would be offered to strategic investors including cite selection, company establishment, licensing, certification, liaison with regulators. ▶Co-investment opportunities by Azerbaijan Investment Company, a fully state-owned equity investment fund (www.aic.az). ▶Possibility of production location in the Sumgait Chemical Industrial Park (www.scip.az).