DIRECTORS' REVIEW FOR THE QUARTER/SIX MONTHS ENDED DECEMBER 31, 2006

We are pleased to present your company’s individual and consolidated un-audited financial Statements for the half-year ended December 31, 2006. The consolidated financial statements incorporate the Company’s 98% owned Farmacia retail venture, as well as its subsidiary BF Biosciences Limited, which is expected to become operational towards the close of the current calendar year. Net Sales of your Company for the Quarter ended December 31, 2006 amounted to Rs. Rs. 240.098 Million, a growth of 23.43% over the figure of 194.514 Million achieved during Quarter II of last year. For the six months ended December 31, 2006, our Net Sales were Rs. 455.913 Million, an improvement of 20.30% over the figure of Rs. 378.972 Million achieved during the first half of the previous year. Consolidated Net Sales including Farmacia also registered a good growth during the quarter and half-year under review. For the Quarter ended December 31, Consolidated Net Sales stood at Rs. 263.505 Million, an improvement of 21.45% over Rs. 216.967 Million achieved in the corresponding quarter of last year. Consolidated Net Sales for the half year were Rs. 503.749 Million, a growth of 18.77% over the Sales of Rs. 424.120 Million for the same period of last year.
Gross Profit (GP) of your company for the Quarter stood at Rs. 134.951 Million, an increase of 24.78% over the GP of Rs. 108.149 Million achieved during the same quarter of last year. For the half-year, Gross Profit improved by 14.98% , from Rs. 220.513 Million for HY 2006 to Rs. 253.557 Million at the close of HY 2007.
Administrative Expenses of the Company decreased by 31.33% and 9.10% for the quarter and half-year respectively. The variation against last year’s figure is primarily because your company made a sizeable one-time donation towards the earthquake relief efforts during the corresponding quarter of the previous year.
The increase in Selling and Distribution costs for the Quarter ended December 31 was 49.05%, whereas these costs increased by 42.41% to Rs. 102.566 Million during the Half Year under review. Financial Cost was lower for the Quarter by 20.19%, and also witnessed a reduction of 13.51% over the 6 month period to Rs. 0.863 Million for the half-year under review. Your Company’s Net Profit from Operations for the Quarter stood at Rs. 70.763 Million, an improvement of 26.20% over the figure of Rs. 56.073 Million achieved during the same quarter of last year. For the half-year, this figure stood at Rs. 127.052 Million, an improvement of 4.05% over the figure of Rs. 122.108 Million achieved during HY 2006. After incorporating your company’s share in Profit of Farmacia, other income and changes on remeasurement of short term investments, the Profit Before Taxation after deduction of Workers’ Profit Participation and Central Research funds stood at Rs. 73.282 Million and Rs. 135.289 Million for the Quarter and Half-year under review, respectively.
After a provision for taxation of Rs. 18.490 Million (HY 2006: Rs. 10.500 Million), the net Profit After Tax (NPAT) of your Company for the Quarter stands at Rs. 54.792 Million, an improvement of 7.88% over the Net Profit of Rs. 50.790 Million achieved during the same period of the previous year. The NPAT for the Half Year stands at Rs. 103.789 Million, a growth of 11.08% over the figure of 93.435 Million achieved during the corresponding period of last year.
The basic Earnings per Share (EPS) of your Company on its increased paid up capital after issue of 20% bonus shares last year, stand at Rs. 4.54 and Rs. 8.61 per 10-rupee share for the Quarter and the Half-year ended December 31, 2006, respectively.
Future Scenario
A primary weakness in your Company’s product portfolio has been a relatively slow addition of new products owing to the time taken in the registration process. We are pleased to report that the Company now plans to launch four major new products in the second half of the year in its established disease areas of cardiology and gastroenterology. While this will necessitate a further increase in selling costs as we carry out our product launches, we are confident that these new products will add strongly to your Company’s top and bottom-line during the coming year.
We are also pleased to report that your Company has reached agreement with Biocon, India’s largest and globally the 16th largest biotech company, for the monoclonal antibody product, Biomab EGFR, indicated for Head and Neck cancer and being studied in global clinical trials for Colorectal, Lung Cancer, Glioma and Pancreatic cancers. The product, which has been developed by Cuba’s Center of Immunology (CIMAB), is being commercialized in the region by Biocon under a 50-50 joint venture with CIMAB.
About 25,000 new cases of head and neck cancer are diagnosed each year in the country. Biomab EGFR has shown remarkable results in the clinical studies conducted in various countries including Canada and the US, and has been granted accelerated orphan status registration by the EU authorities. Your company views this agreement with Biocon as an important milestone towards achieving our vision of becoming a complete provider in the field of cancer treatment. Monoclonal antibodies are emerging as the most important new class of drugs in cancer therapy. With this alliance, we are confident that we will make a substantial contribution to the treatment of head and neck and other cancers in Pakistan by providing cutting-edge, targeted therapy at an affordable treatment cost for the patients of Pakistan. We are hopeful that this drug will Inshallah add great value to the company’s oncology and biotech portfolio, and will strengthen its subsidiary BF Biosciences Limited, when it comes into operation towards the end of the calendar year. Construction of the BF Biosciences plant at Lahore is continuing on schedule

For and on Behalf of the Board of Directors

(Mrs. Akhter Khalid Waheed)
Chairperson & Chief Executive

January 27, 2007

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