PROTEK Group acquires manufacturer of antibiotics “Rafarma”

PROTEK group will pay the previous owner of “Rafarma” 661.5 million rubles, of which it only owes only 332.5 million rubles – this sum group will repay before the end of the year, as follows from its reporting for the first half of 2017.

In addition, PROTEK took on 6.69 billion rubles of “Rafarma” liabilities to Vnesheconombank (VEB). The debt is restructured: 2.14 billion rubles, the group paid to VEB with cash, another 4.5 billion rubles was transferred to the Bank in the form of simple interest-free promissory notes payable from March 2018 to March 2024. Which means, taking into account the debt and compensation to the previous owner, “Rafarma” costed to PROTEK 7.3 billion.

Actually, PROTEK bought 100% of “Rafarma” that has a plant in the Lipetsk region in April 2017, the amount of the transaction was not disclosed at the time.

Based on the amount of the transaction, PROTEK paid for “Rafarma” more than the cost of the plant construction, becuase to build such a plant from scratch is less expenvise, experts say. But the cost may be justified as PROTEK bought time for the construction, since licensing and commissioning of the plant takes an average of 4-5 years. With the purchase of “Rafarma” PROTEK eliminated the need for construction of a plant for solid dosage forms in the Sergievo-Posadsky district of Moscow region, said the President of PROTEK Vadim Muzyaev on the call with investors. Two years ago he assessed its value to 80 million euros, depending on capacity.

“Rafarma” plant has five workshops: two for the production of antibiotics, two for the production of Oncology drugs and one for common groups of drugs. With this purchase PROTEK plans to expand the share in the pharmaceutical market and to increase profitability by improving efficiency through economies of scale, says the company report. The short-term plan is to reach the breakeven point, and after 3– 5 years the company will have a highly effective portfolio of MNN generics (i.e. non-branded analogues of original drugs), said Mr. Muzyaev. “Rafarma” revenue from the date of acquisition to 30 June 2017  amounted to 28 million rubles, net loss – 531,6 million rubles, as reported by PROTEK.

JSC PROTEK shareholders: (data at 31 December 2014): Vadim Yakunin (74,42%, of which 50% through PROTEK LLC (OOO, 24,42%), 3,42% owned by companies within the group, Hungarian Gedeon Richter (5%),  the remaining shares are traded on the Moscow Exchange.
Capitalization (28 April 2015) – RUB 21.6 billion.
Financial performance (IFRS, 2014):
revenue – 156,9 billion rubles
net profit of 4.8 billion rubles.
Founded in 1990, acts as a distributor of pharmaceuticals and products for health and beauty (the main operating company ZAO “Tsentr vnedreniya PROTEK), production of pharmaceutical drugs (ZAO FarmFirma “Soteks”, JSC “Protein contour”, LLC “Anvilab”), and retails through the pharmacy chain “Rigla” (1202 pharmacies in 40 regions of Russia by the end of 2014).

“Rafarma” is a manufacturing pharmaceutical complex of full cycle in the Lipetsk region; the company produces antibiotics and anticancer drugs, including the contract for the Indian Lok-Beta Pharmaceuticals Ltd and Macleods Pharmaceuticals, Chinese pharmaceutical Harbin bioengineering Corporation.

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