CapMan Russia has acquired a stake in Perm pharmaceuticals manufacturer “Medisorb”, as per the Fund’s website and data from the Cyprus registry. “Medisorb group”, according to the register, belongs to the JSC “Medisorb” (0,02%), the rest to Cyprus “Medisorb holding”, now 45% of the latter is owned by CapMan Russia II Fund (Guernsey), the remaining 55% are with Vladimir Foteev, CEO of Medisobr.
Today portfolio of “Medisorb”, according to its website, includes citramon, analgin, meloxicam, paracetamol, bromhexine, mukaltin, children’s vitamin supplements and other medications. The income of consumers has fallen in recent years and they began to switch to cheaper analogues, umbrella brands with quality packaging. Such market deal maybe an attempt to attract the consumer, and the investor believed it is a good market strategy. CapMan Russia decided to invest in the Perm pharmaceutical company because the market for generics is growing globally, and in Russia it is growing rapidly at the expense of import substitution to more affordable Russian drugs. “Medisorb” has good portfolio of generic drugs that are successfully sold in drugstores, and quite a lot of new drugs are in development and registration process.
“Medisorb” plans to work in the field of public procurement. The investor was required also for the implementation of plans for the production of inhalation anesthetic sevoflurane and treatment for HIV, says Mr. Foteev. “Sevoflurane: the production facility is being built, while it’s undergoing clinical trials, and the drug can be on the market in 2019”, he added.
In July 2017, the press service of the government of the Perm region reported that “Medisorb” will build a new plant investing 11.5 million Euro: “There will be three production lines: the first and the second – for the production of solid dosage forms – and third for liquid”. The last will produce sevoflurane medisorb.
For the purpose of the transaction with CapMan Russia “Medisorb” issued additional shares. The funds raised will go to the development of the company, increase production capacity, and the release of new drugs. CapMan investment will allow the company to increase its revenue several times in the next 3-5 years, expects Mr. Vlasov (CapMan Russia partner). JSC “Medisorb” 2016 sales – 727,35 million rubles (-1,11%), net profit of 90.3 mln (+10.5 percent). Last year, the “Medisorb” sold 115 million packages of drugs, and for the first half of 2017 is already 75 million, said Mr. Vlasov.
In this industry companies’ EBITDA could be around 30% of revenue, and in M&A deals of such companies they may be estimated at about 10x EBITDA. Thus, the 45% stake, according to rough estimates, could cost around 1 billion rubles.
The transaction took place in 2017, according to CapMan. The size of all new investments for CapMan Russian Fund amounted to 14 million euros, and during this time CapMan Russian Fund had only one investment as stated in the CapMan financial statements.
As a rule, CapMan leaves a reserve for additional investment in each portfolio company, says Mr. Vlasov. But future investments in investment agreements are usually not prescribed in advance, unless there was an option included in the shareholders agreement. Therefore, if such an opportunity [for future investment in the “Medisorb”] appears as it will be another deal that will need to be agreed by all parties.