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From Russia with drugs
August 2013
by Ilene Schneider  |  Email the author
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MOSCOW—While Russia's largest pharmaceutical firm, Pharmstandard, is ranked third among 30 leading generic manufacturers in GlobalData's PharmaLeaders in Russia, its presence outside of Europe is virtually unknown. Pharmaceutical analysts speculate the company's recent announcement of its intended acquisition of Singapore-based Bever Pharmaceutical may be an attempt to use its operations in the high-growth Singapore pharma market to launch operations in the rest of Asia and elsewhere.  
 
Pharmstandard held a 3.4-percent share of Russia's $24.9-billion pharmaceutical market last year, putting it behind Swiss drugmaker Novartis AG and French pharma Sanofi. The Bever transaction could provide a portal to the Russian market, where foreign drugmakers have been limited by the government, according to various sources.  
 
Apparently in a growth mode, Pharmstandard acquired two companies in 2012, according to Igor Krylov, CEO, at a press conference on July 25. In November 2012, the company acquired Lekko CJSC, a Russian innovation company focused on the research, development, production and marketing of high- efficacy drugs, as well as Pharmapark LLC Biomed. Krylov added that first-half sales grew 2 percent annually, while sales excluding third-party products grew 25 percent. Pharmaceutical products and medical equipment accounted for 97.2 percent and 2.8 percent of the company's total sales in the first half of 2013, respectively, he says.  
 
On July 5, Pharmstandard's board of directors announced a shareholder meeting to discuss the potential acquisition of 100-percent share capital of Bever for $630 million. 
 
Bever holds exclusive rights for the supply of active pharmaceutical ingredients for the production of Arbidol and Aphobazolum, two Pharmstandard products, at a fixed price.
 
After the proposed acquisition, the company would decrease its procurement costs. Pharmstandard also plans to spin off its business that makes branded, non-prescription drugs. Shares in the over-the-counter drug unit will be distributed proportionally to Pharmstandard stockholders. Pharmstandard has been considering selling the over- the-counter unit, which may be valued at about $2.5 billion. Citigroup Inc. was helping organize the sale process for the over-the-counter unit.  
 
According to financial analysts, Pharmstandard is minimally leveraged. Thus, its decision to spin off its over-the-counter business segment, rather than selling it, and acquiring Bever, may put some strain on its working capital. The decision is pending a shareholders' meeting slated for Sept. 27, after which the company could still opt to sell its over-the-counter business segment, rather than spinning it off.  
 
Pharmstandard develops and manufactures more than 250 pharmaceutical products, including drugs for treatment of cardiovascular diseases, diabetes, growth hormone deficiency, gastroenterological conditions, neurological diseases, contagious diseases, metabolic disorders, cancer and other diseases. The most popular Pharmstandard products today are Arbidol, Complivit, Pentalgin, Flucostat, Phosphoglive, Amixin, Afobazol, Rastan and Biosulin. As of 2004, Pharmstandard developed more than 60 new pharmaceutical products in co-operation with Russia's leading scientific centers. The company is a member of a joint bioengineering project, Generium, whose main objective is "to develop socially significant pharmaceutical products within the framework of the import substitution state program," according to the Pharmstandard website.  
 
The company has eight pharmaceutical production plants. All plants are going to be converted to European GMP standards by 2014, according to the schedule approved by the company's management. 

Last year, Pharmstandard's over-the-counter drug sales fell 4.5 percent to 14.8 billion rubles ($445 million), accounting for 29 percent of the company's revenue. Its sales growth came from the prescription-drug unit, with revenue rising 33 percent.  
 
Pharmstandard's revenue from third-party over-the-counter products also climbed 30 percent to 28.3 billion rubles. Global depositary receipts fell 1.2 percent to close at $20.10 in London. In addition, Pharmstandard is listed on Moscow's Micex exchange. Little is known about Bever, which does not even have a website. Pharmstandard says Bever "develops and produces pharmaceutical ingredients essential for the manufacture of medications."
 
 
 
Code: E081309

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