Results 2015: pharmaceutical Market – performance backstage

Results 2015: pharmaceutical Market – performance backstage

Moscow. December 28. The outgoing year was rich in both expected and unpredictable events in the Russian pharmaceutical industry. The continuing consolidation of the retail market, the rejection of the publicity of a number of Russian pharmaceutical manufacturers, the increased presence of foreign players in the domestic steel market, the main trends of 2015.

Something has already been implemented, but much remains to be done in 2016. Whether the public is informed about what is happening in the industry and how timely it will be done. Because 2015 is shown that parseobject is becoming more closed, and the most interesting and important, often goes on behind the scenes than on the stage of pharmaceutical industry.

Less than a year, and only two

The main newsmaker of 2015 again become a “pharmacy chain 36.6”, which finally completed a merger with drug group A. v.e. The merger was announced back in 2013, but came true only two years later, although management promised to hold the largest deal in the retail pharmaceutical market much earlier.

Based on the time, the long-awaited deal was not as easy as planned. “Pharmacy chain 36.6” three times collected shareholders to approve additional shares. Twice the meeting was cancelled for lack of quorum, and only in October 2014 was able to recruit the necessary number of votes, and the transaction “was”.

But the obstacles on the road to unification has not ended. A group of minority shareholders “36,6” who do not agree with the company’s plans, became actively involved in the various ministries and agencies, requiring to obstruct the deal. According to them, the actions of the management of the company violate their rights and interests. But numerous letters and statements have not yielded the expected result, and at the end of September 2015, the merger was completed.

The structure of the majority shareholders “36,6” Vladimir Kintsurashvili and Ivan Saganelidze Palesora Limited contributed as payment for additional issue of 100% of shares of operating companies – LLC “Apteka-A. V. e” and LLC “Apteka-A. V. e-1”. In A. v the result.e Group became part of the group of companies “36,6”, and the proportion rose to Palesora of 78.96%.

This is, perhaps, the most important event in the life of the company, of which she in the past year reported the market. But the most interesting, as always, remains behind the scenes. Displaying extraordinary restraint and patience on the part of the official comment, network of pharmacies, nevertheless, constantly be in the center of various rumors, which excited the market.

In the autumn of the pharmaceutical community actively discussed the intention of the “36,6” buy distributor Alliance Healthcare Russia, owned by American pharmacy giant Walgreens Boots Alliance. When the parties denied the deal, the market decided that something totally opposite plans – Alliance buy “36,6”. But this conjecture is not confirmed. However, gossip is not over. Well-wishers are “sold” as “Pharmacy chain 36,6” one of the biggest competitors – A5 Group, but the deal has not been confirmed.

Denying the transaction, discuss the market, about further plans on development of the company “pharmacy chain 36.6” says rather cautiously. This behavior pharmacy network inevitably makes me think about a new “project” majorities groups from year to year, surprising the market with its activity and enterprise.

Hidden agendas

As you know, there’s no smoke without fire. The story of the sale of pharmacy group A5, which for several months worried about the market, were true. Here are just a buyer, no one guessed. The proposed market potential challengers – and “pharmacy chain 36.6” and the group “PROTEK”, which develops the pharmacy chain “Rigla”, – was the wrong answer to this puzzle. The buyer is the banker Roman Avdeev who already “inside” to examine all production and retail segments of the pharmaceutical market.

Co-owner Avdeev Moscow credit Bank (ICB is the main creditor of “Pharmacy chain 36,6”) became a prominent figure in the pharmaceutical industry in 2013, when bought at “36,6” 51% of pharmaceutical manufacturer “Veropharm”. Then he increased stake in the company to 98.3% and sold it to American company Abbott.

This summer Vice-President of “IBC Capital” (manages the assets Avdeeva) Andrey Kryukov has joined the Board of Directors of “Pharmacy chain 36,6”. Then after the additional issue “MDB Capital” became the owner of 5.4% of pharmacy companies, however a month later sold his share.

This time Roman Avdeev have in mind, probably the most ambitious deal in the Russian pharmacy market. The banker buys the A5, and then concatenates it with “Pharmacy chain 36,6”, which will see a new undisputed leader of retail pharmaceutical market.

According to analytical company DSM Group, in the first three quarters of 2015 the share “36,6” in the commercial market is 3.3%, A5 – 2,4%. The number of owned pharmacies at the end of September is estimated at 917 and 1091, respectively. Thus, as a result of the merger the combined company will lead in and leave far behind “Wrigley” (a share of 3.5%, 1387 pharmacies).

Under the veil of the outgoing year, Roman Avdeev has closed a deal to purchase a controlling package A5. OOO “Concern “Rossium” (owns assets Avdeeva, including 70,02% ICD) bought out the majority shareholders of the Novel A5 Buzdalin and Sergey Solodov 68,75% of the company. The second shareholder group pharmacy – Fund Baring Vostok Private Equity Fund V (31,25%) will retain its stake in the company.

While Roman Avdeev slowly but surely realizes the designed, other players of the pharmaceutical market is also not standing still and actively participate in the process of consolidation of retail: big players take a less influential company in the Federal scale, but quite significant in the regions of its presence.

At the forefront in this regard in the past year was the group of companies “Growth”, the main shareholder of which is David Panikashvili. If in 2014, the pharmacy chain “rainbow” (part of “Growth”) annexed of the Petersburg network “First aid” in 2015, the company acquired Nizhny Novgorod discounter “okay”. As a result, the pharmacy chain has grown to 1.1 thousand points that work in 46 Russian cities.

But remain on the pharmacy market and the adherents of organic growth. One of the representatives of this camp you can call the pharmacy chain “Rigla”. The company plans to close in 2015 with 1.5 thousand pharmacies, showing an increase by 2014 of 25%. Next year the company plans to grow at a slower pace. To increase the network is planned, primarily due to organic growth, the acquisition of pharmacies is considered, but a large network to purchase is not planned, reported the head of the company Alexander Filippov.

Farewell to the publicity

If the retail market the most discussed company invariably becomes “pharmacy chain 36.6”, among the manufacturers of these award-Lavrov “Pharmstandard”. The company, which is also not very open communication with the market, according to tradition, after a long lull “dumped” on the market relevant news, without commenting or explaining what is happening.

Structure of major shareholders of the pharmaceutical manufacturer Victor Haritonin and Yegor Kulkov Augment Investments in mid-year announced its intention to redeem all of GDRs of Pharmstandard, and further not to increase its stake in the company to 100%, making the largest Russian pharmaceutical manufacturer private.

It was noted that, if maioritario will receive such number of GDR, which upon conversion into shares together with the existing securities of “Pharmstandard” will be more than 75%, then Augment converts GDR and will announce a mandatory offer to buy remaining shares. If you consolidate more than 95% Augment will hold the compulsory redemption of shares to increase its stake in the company to 100%.

In preparation for such an important operation, maioritario “Pharmstandard” has obtained support already known to the market Alexander Shuster, who rose to fame after the mega-deals in 2013, when he sold to “Pharmstandard” mysterious Singaporean Bever Pharmaceutical for $590 million (for the asset he received 18,74% “Pharmstandard” and another $48 million in cash). This time Schuster had agreed with majority shareholders of the pharmaceutical producer on the sale of its owned 6.4% of shares of “Pharmstandard” for $53,24 million, as well as GDR (10,03% of the share capital of the company). In the case of placing a mandatory offer for the majority shareholders to buy the shares of the company, Schuster promised to submit the remaining 2.41 per cent of the shares.

Conceived by co-owners of “Pharmstandard” so far managed to implement only partially. Of outstanding receipts shareholders bought half (11,55% of the share capital), and another 6.4% stake in the company Haritonin and Kulkov purchased at Schuster. As a result, the share of the partners in the company increased from 54,32% to 72,27%.

Why are co-owners of the company, who are the real masters of swing on the market (just remember 2013, when the selection of branded OTC business into a separate company and purchase of the Singapore Bever claimed more than half the capitalization of “Pharmstandard”), started this operation, they do not hide. In their opinion, the best fate for “Pharmstandard” will be the loss of publicity. In private companies, they note, it is easier to make strategic decisions. In addition, the simplification of the corporate structure and governance of the company will improve operating efficiency and reduce costs.

Pharmstandard became the first Russian pharmaceutical company, have decided to abandon publicity. A year earlier such plans were stated Veropharm, once majority-owned by pharmaceutical manufacturer Abbott was an American. At the end of March of the current year the shares of “Veropharm” has ceased to be traded on the Moscow exchange, and a month later the Bank of Russia has released the company from mandatory disclosure.

Purchased “Rossiiskoi”

Under the veil of the outgoing year the Russian farmotrasli got kind of a Christmas “gift” from the government – signed a government decree restricting government purchases of foreign drugs. The market expected of paper for a long time, but a long process of discussion and coordination in the ministries and departments caused the “freezing” process.

The resolution, called “third wheel” provides that if the procurement involved at least two producers from any member country of the Eurasian economic Union (EEU), producers from third countries are not allowed to participate. Restrictions apply only to drugs that are included in the list of vital and essential drugs (VED) and produced at least two local manufacturers. These criteria correspond to 282 of the drug, and they will apply restrictive measures.

As for the market, especially for the global pharmaceutical industry, was a pleasant surprise that a foreign company may be treated as local if it packages the drugs in the countries of the EEU until the end of 2016. Earlier it was planned that this criterion will be valid only until the end of 2015. From 2017 the company will have to produce in those countries at least finished dosage form, to be considered a local player.

The market reacts to the decision quite cautiously. It is understandable, because it existed for a long time, it was only in terms of its signature, which constantly shifts. Some foreign manufacturers, like anticipating, already began to strengthen its presence in Russia, acquiring or building new production facilities, part of which was launched in 2015.

The outgoing year was indeed a fruitful start of the new production facilities of foreign pharmaceutical industry. So, in April, the Danish Novo Nordisk has launched a plant in Kaluga, two months later, near St. Petersburg plant has been entered by the Swiss Novartis. “Closed” the Swedish-British AstraZeneca, which in October launched a plant in Kaluga region.

But the construction of the plant, however, like its acquisition, is a long and expensive does not always correspond to the economy of the company, so such a step are solved not all. A more popular way to gain a foothold in the Russian market is the localization of production capacities of local businesses. It’s also long lasting project that requires some investment, but nonetheless, they are not comparable to temporal and monetary costs that are inevitable when building or buying production.

In any case, no matter what, even in a crisis growing Russian market attracts foreign companies which in one voice say that they would not leave Russia and will try to expand its presence in the country. Thus, the German Boehringer Ingelheim continues to look for a partner for manufacturing of its biotechnology products, Japanese Takeda is considering M&A deals and is already conducting negotiations, and Indian Lupin and all purchases of the Stavropol farmzavod “Biocom”.