09.05.2000, Tallinna Farmaatsiatehas, TLN

TALLINNA FARMAATSIATEHAS

ANNOUNCEMENT



MANAGEMENT REPORT 1999



GENERAL DATA



As at 31 December 1999 the stock capital of Tallinna Farmaatsiatehase AS 

was 12 500 000 EEK (twelve million and five hundred thousands Estonian kroons).

According to the decision of the Shareholders' General Meeting in April 30 

1999 the share capital was decreased from 37 700 340 EEK to 12 500 000 EEK.



Number of employees as at 31.12.1999 was 218.





SHAREHOLDERS



Shareholders holding more than 2% of shares:



Shareholder				   Number of shares	  % of shares

Grindeks PJSC					686.996			55.0

Floridian Trading International Ltd.		184.747			14.8

Optiva Pank					114.787			 9.2

Skandinaviska Enskilda Banken AB clients	 40.006			 3.2

Merita Pank Ltd. clients			 19.927			 4.2





COUNCIL



Till April 30, 1999 the members of Council were following:



Valdis Jakobsons - chairman of the council;

Margus Linnamäe - member of the council;

Ülar Maapalu - member of the council;

Inga Kuusik - member of the council;

Andres Toome - member of the council.



Since April 30, 1999 there were elected following Council members:



Vitalijs Skrivelis - chairman of the council;

Elita Liela - member of the council;

Sander Zibo - member of the council.



BOARD



Up to March 23, 1999 -  Arno Kaseniit, chairman of the board.



Since March 23 up to August 12, 1999:

Jelena Borcova,- chairman of the board;

Arno Kaseniit- member of the board.



Since August 12, 1999:

Jelena Borcova- chairman of the board;

Alar Kiilmaa- member of the board.



Council and Board members do not own the shares of Tallinna 

Farmaatsiatehase AS.



MANAGEMENT



Raivo Unt - Director of finance;

Jüri Kärk - Director of technique;

Irene Pehk - Head of production department;

Maret Sihv - Head of development and registration department;

Peeter Villako - Sales manager for Estonia;

Saima Pokats - Head of quality control department.





FINANCIAL RESULTS IN 1999



In 1999 the net turnover of the company was 74.8 million EEK.  Compared to 

1998 the turnover decreased by 8.8 million EEK or 11%. The main reason for

setback in turnover was decreased sales volumes to export markets, caused by

the economic and financial crisis in Russia, which started in the summer 1998

and lasted throughout 1999.



Tallinna Farmaatsiatehase AS ended the financial year of 1999 with profit of

5.8 million EEK.  In 1998 the Company had a loss of 92.8 million EEK. The

company has passed the crisis of previous periods and stabilized.



In 1999 there was contracted the leg of financial reorganization of the 

company and realization of activities related to cutback of spending.

Compared to 1998 total expenses of Tallinna Farmaatsiatehase AS decreased by

98.3 million EEK, from which the cost of materials was 20.6 million EEK (38%),

personnel cost 5.4 million EEK (25%). The company has reduced the level of

inventories.  Compared to the beginning of the year, the volume of raw

materials was 9.4 million EEK lower (26%).



During 1999 the Company continued activities with accounts receivables which

occurred in 1998. The final decision based on their collectability will be 

made in the first quarter of 2000.





INVESTMENTS IN FIXED ASSETS



Investments to fixed assets total was 3 million EEK, incl. production 2.7

million EEK. Reconstruction works in 1999 were down in the amount of 1.4

million EEK, which was capitalized.

At the end of 1999 the unfinished capital investments were amounting total 

of 1.3 million EEK.



INVESTMENTS IN IMMATERIAL FIXED ASSETS (licenses)



0.56 million EEK were invested in drug registration, from which 0.22 was

capitalized.





PRODUCTION AND PRODUCT DEVELOPMENT



In 1999 Tallinna Farmaatsiatehase AS produced over 65 different

pharmaceuticals, incl. injections, tablets and ointments. The output 

was 13.86 million packages, which is 63% from previous year output.  

Main decrease took place in production of ampoules (26% from previous year).

The major reason of production decrease was related to orders with small

quantities in the beginning of a year.  In the 2nd half-year the capacity 

of orders normalized and the tablet production output increased 4 times.  

For the year 2000 the estimated production plan is 20 million packages.



During 1999 there were submitted 34 registration dossiers of 23 products

into 6 countries, from them 1 dossier for a new product (DIGOXIN injection)

and 26 in registration documentation were submitted into 9 countries.

Clinical trial of ointment VIPROSAL B and bioequivalence study of FUROSEMID

tablets were carried out in collaboration with scientific institutions.



Both trials were conducted in accordance with Good Clinical Practice.

In 3 countries (Ukraine, Kazakh and Azerbaijan) have been registered

trademarks for 4 products. Collaborating with Grindeks - there is going

on the development process of 5 new products.



SALES



The average monthly turnover in the 1st half of 1999 was approximately

5 million EEK.  In the Q4 of 1999 the sales volumes stabled and net sales

amounted to 28.8 million EEK (38.5% of capacity of the year).



Sales in Estonia have increased by 3.1 million EEK (18.8 million EEK in

1999,26.3% of total year's sales; the same figure in 1998 was about 19%).

The sales in Estonia showed growth tendencies, caused by policy of active

sales.  Since 1999 - there is working united sales structure of Grindeks

and Tallinna Farmaatsiatehase AS.  The Company has achieved the stabile

market position in Estonia.  The market share of Tallinna Farmaatsiatehase

AS is approximately 2% in Estonia.  From net sales Russia and CIS accounted

for 56.5%, in 1998 the same figure was 68% (in 1997 - 78.6%). Since September

1998, the export of Tallinna Farmaatsiatehase AS has been done through

Grindeks.

The main task for 1999 was to achieve optimum sales quantities, corresponding

the production capacities the Company has fulfilled.



FUTURE PROSPECTIVES



Budget for 2000 and draft budgets for the next 5 years have prepared relying

on the existing going concern concept to maintain significant role of

Tallinna Framaatsiatehase AS in domestic Estonian market and a step by step

switch from unstable Russian and CIF markets to more stable Baltic, Central

Europe and Scandinavian pharmaceutical markets.



Starting from 1999, Grindeks as the parent company and Tallinna

Farmaatsiatehase AS as subsidiary have formed united marketing and sales

structures.  The aim is to increase the effectiveness of sales structure's

activities and sale capacity in domestic market.  The main object of the

Company in the sphere of marketing is to increase the part of sales for

Baltic States and Europe, by the same time diminishing dependence on the

markets with high risk, focusing on customer orientation and quality.

In the year 2000 the estimated sales volume of the Company is ca.

95 million EEK.



According to policy of the concern, there will be accomplished the

reconstruction programme of the Company's production for the purpose to

achieve compliance with the requirements of GMP (Good Manufacturing Practice)

with improvements in Quality Assurance, Production facilities and logistic

infrastructure.



The major priority of is to continue the effective production of drugs of

high-quality and optimal price, in compliance with ISO and manufacturing

standards.



The objectives of general management of the company are identifying and

minimising risk associated with operations, assets and personnel, company

efficiency and rational cost safe policy maintenance.





Jelena Borcova

Chairman of the Board

+372 6120201