Pharmstandard to Buy Ingredient Supplier for $590 Million

Russian drugmaker Pharmstandard has agreed to buy a supplier of ingredients for its flagship anti-viral and anxiety drugs for $590 million, as part of a plan to spin off its over-the-counter (OTC) business.

The plan to purchase Bever Pharmaceutical prompted a sell-off in Pharmstandard's shares when it was first announced in July. Analysts were concerned about a lack of information regarding Bever or a clear reason for the deal.

Pharmstandard said it would pay $542 million in shares and $48 million in cash to buy Bever from Pharmstandard board member Alexander Shuster, who will become Pharmstandard's second-largest shareholder with an 18.7% stake.

The deal was initially valued at $630 million. Pharmstandard has said Bever would become part of the OTC unit it plans to spin off and later list on the Moscow Exchange.

With a market value of around $2 billion, Pharmstandard is Russia's biggest drug maker in a market dominated by foreign pharmaceutical firms.

It said in a statement that the deal aimed to secure the long-term supply of critical pharmaceutical ingredients for its antiviral drug Arbidol and anti-anxiety drug Aphobazolum and to improve profitability after securing lower prices.

In a presentation on its website, Pharmstandard said Bever signed on June 25 a new 20-year contract for the supplies of the ingredients at a fixed price, adding Pharmstandard could have saved $60 million had it been signed in 2012.

The company also said on a conference call it would continue to develop the prescription business as well as sales of third-party drugs after the completion of the proposed OTC spin-off and was open to more acquisition opportunities.

Pharmstandard recently bought Shuster's 5.4% stake in Pharmstandard subsidiary Donelle, which has the rights to Aphobazolum, for 121 million rubles, and plans to buy out the remaining 5.47% it does not already own from third parties.