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Abbott offers up to $495m for Russia's Veropharm

Acquisition will add to its generics portfolio

Abbott 

Abbott Laboratories has added to its generic drugs portfolio with a deal to acquire Russian pharma company Veropharm.

Veropharm is one of the largest drugmakers in Russia and sells more than 100 drug products that complement Abbott's current portfolio in women's health, central nervous system, cardiovascular and gastroenterology disorders, while adding a range of cancer medicines.

Abbott will acquire the holding company (Garden Hills) that owns around 80 per cent of Veropharm to gain control of the company, so the value of the deal could be between $395m and $495m, depending on the number of shares held.

Multinational drugmakers have been trying to get a foothold in the fast-growing Russian pharma market as President Vladimir Putin continues to push for greater domestic production of medicines and curbs on imports.

The government has been outlining to give preference to locally-made medicines when the national reimbursement system is introduced, so deals which bring domestic production capacity have been particularly attractive with Novo Nordisk, Sanofi, Bayer, Johnson & Johnson (J&J), Novartis, AstraZeneca (AZ), Merck & Co and Takeda among those going down this route.

Abbott's offer for Veropharm is firmly in that category, allowing it to expand its presence in local production by adding the Russian company's current facilities as well as another site that is currently under construction.

The US company also has a joint venture in Russia with vaccines company Petrovax Pharma but was prevented from acquiring full control of the firm by the Russian government last year.

All told, in the last four years big pharma has invested around $1.6bn in partnerships and acquisitions in Russia, according to figures provided by the country's Association of International Pharmaceutical Manufacturers (AIPM).

Russia wants to be 50 per cent self-sufficient in medicines by 2020, although it is currently providing only a quarter of its medicines domestically at best, according to Business Monitor International. Moreover, the figure is inflated as the definition of domestic production currently includes packaging of drugs made elsewhere, although this loophole will close in 2016.

"Multinationals have anticipated these moves and broken ground on manufacturing sites in the country," according to BMI.

"Partnerships and joint ventures between local companies and multinationals are likely to become more important in the future in order to comply with the evolving regulatory environment of Russia."

Abbott said it expects the Veropharm acquisition to close in the fourth quarter and add around $150m to its sales next year.

Article by
Phil Taylor

24th June 2014

From: Sales

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