Industry
Russia Pharmstandard to float up to 40 pct in IPO
Last Updated: 2007-04-11 16:00:48 -0400 (Reuters Health)
By Douglas Busvine
MOSCOW (Reuters) - Russia's largest drug maker, Pharmstandard plans to float a stake of up to 40 percent in London and Moscow, making it the first Russian pharmaceuticals firm to list abroad.
Pharmstandard said it was the fourth-largest drug company operating in Russia by sales volume last year. An independent researcher said it had grabbed the lead in the commercial sector of the market in the early months of 2007.
One source familiar with the deal said the stock offering's lead managers, Citigroup and UBS, had put a mid-range valuation on Pharmstandard at around $2 billion, a figure some analysts said appeared ambitious.
"Our goal is to strengthen further our position as the leading domestic pharmaceutical company in Russia," General Director Igor Krylov said on Wednesday.
Krylov added Pharmstandard's strategy is "promoting our market leading brands, launching new products, increasing investment in sales and marketing and selectively acquiring additional companies".
Analysts said a lack of listed rivals made it tough to estimate how the market might value Pharmstandard, although Olga Samarets at Prospekt brokerage said that, based on market multiples, it could be worth $1.4 billion to $1.7 billion.
One banking source said Pharmstandard would launch a road show on April 23, when it will announce a preliminary price range for its initial public offering (IPO) of global depositary receipts in London and ordinary shares in Moscow.
Final pricing should be set by May 4. Pharmstandard has a small listing on Moscow's RTS exchange, but it called this a technical preparation for its IPO and not indicative of its likely market valuation.
BOOMING SALES
The float follows Pharmstandard's acquisition last year of Masterlek and with it a product portfolio including antiviral drug Arbidol, the market leader in Russia ahead of Pfizer's Viagra anti-impotence treatment.
Russian commercial drug sales rose by 22 percent in 2006 to $5.2 billion, according to market researchers Pharmexpert, which said Pharmstandard had taken first place in the first two months of this year from Sanofi-Aventis.
"This is a very dynamic company. It has consistently shown annual sales growth of 30-40 percent -- faster than the market," said Pharmexpert's head of market research, David Melik-Guseinov.
The float would be of existing shares belonging to the company's owners -- Viktor Kharitonin, Yegor Kulkov and Millhouse Capital, the investment vehicle of Russia's richest man, Roman Abramovich, which owns a 31 percent stake.
Pharmstandard had previously postponed its stock offering amid discussions as to whether it should issue any new shares to raise funds to invest in the business.
"It is a pure secondary offering -- our owners have decided to monetise their investments," said spokeswoman Olga Leschankaya. "The current plan is to sell up to 40 percent," she added, declining to estimate proceeds from the float.
Announcing 2006 results, the company said sales rose 50 percent to 8.52 billion roubles ($324 million) while net profits gained 109 percent to 1.9 billion roubles ($72 million).
Only 8 percent of overall sales were tied to a government drugs reimbursement programme. The scheme, designed to replace Soviet-style provision for people on low incomes, has been hit by teething troubles and financial woes.
(Additional reporting by Anton Doroshev and Olga Popova)
