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7 June / 2019

Sistema JSFC purchases two pharmaceutical manufacturers from Magnit co-owner

   Vladimir Evtushenkov's Sistema JSFC agreed to purchase shares in two pharmaceutical companies, namely Company Kurgan Medicines and Products Sintez and Biocom. The seller is Alexander Vinokurov's Marathon Group. 

     The binding agreement on the deal was signed at the St. Petersburg international economic forum, the statement of the companies said. The deal is expected to be closed within three months after receiving approval from the Federal Antimonopoly Service. The deal value is not disclosed.   

     Vedomosti reported  on  the upcoming deal with reference to the sources on 5 June. At the time, Sergey Shulyak, Director General of DSM Group, assessed the value of both companies at 15-16 billion roubles, excluding the debt. Ivan Glushkov, Deputy Director General of Stada CIS, noted that the value of both assets depends on whether the state will co-finance the costs of drugs prescribed on outpatient basis. If this is the case, the lower price segment will grow significantly and both assets of Marathon Group can cost 30 billion roubles according to prudent valuation; if this is not the case, even the amount of 10 billion roubles will be "very positive assessment", he reasoned. 

      According to the data of the company, Sintez is among the top ten largest Russian plants for the drugs production with a market share of about 3%. Its portfolio can be divided into the three following main groups: antibiotics, pulmonary products and products for the treatment of the musculoskeletal system. Its revenue amounts to 8.6 billion roubles in 2018, its net profit amounts 910 million roubles. At the end of March, Marathon Group had 51.6% of Sintez shares, Natsimbio, subsidiary of Rostec, had 42% of the shares. Biocom (in which Marathon Group has 75% of shares) produces generic antibacterial agents and products used in the treatment of diseases of the central nervous system and cardiovascular diseases. 

      According to the source familiar with the negotiations between Sistema and Marathon Group, this deal "will be arranged in a similar way to the acquisition of" OBL Pharm, "Sistema won't have to make large investments that way". 

    At the end of 2018, Sistema and VTB acquired pharmaceutical manufacturer OBL Pharm. Sistema paid 1.83 billion roubles for 13% of the company and undertook to redeem the share of VTB within the period of three years. In April, the partners agreed with the Russian Direct Investment Fund, the Russia-China Investment Fund and the Middle East funds that they will acquire a share in the capital of OBL Pharm. After the deal closure (that it planned in the second quarter), the consortium of investors will have 28% of the pharmaceutical company, VTB will have 46% of it, Sistema will have 13% of it.  

    It is supposed that Sintez and Biocom can become parts of Alium, the company being established on the basis of OBL Pharm and also owned by JSFC Binnopharm. After the inclusion of new assets, Alium will become one of the three largest Russian pharmaceutical companies in the commercial segment, the statement of Sistema and Marathon said. Alium will have six pharmaceutical manufacturing complexes in Moscow and the Moscow region, Kurgan and Stavropol. 

      The deal will help to reduce marketing and promotion costs, administrative costs, increase the geographical coverage of sales, Andrey Dubovskov, President of Sistema JSFC, lists, together it will ensure an increase of the value of Sistema JSFC share in this business. 

      "Sergey Viktorovich [Chemezov] convinced me... I really believe him", Evtushenkov answered the question of what potential he sees in these enterprises. 

     Answering journalist questions, Vinokurov recalled that his group also has Fort plant for the production of immunobiological products, "Together with State Corporation Rostec, we develop it actively". According to Vinokurov, there are no negotiations on its sale yet.