Abbott bulks up in Russia with $495M deal for Veropharm

Abbott Laboratories ($ABT) has said it plans to focus its branded generics business on a select group of rapidly expanding emerging markets. It appears Russia is one of them. The Illinois-based drugmaker will shell out up to $495 million to buy the fast-growing Russian generics maker VeroPharm from local billionaire Roman Avdeev.

Abbott will pick up Garden Hills, an Avdeev holding company that controls more than 80% of VeroPharm, for between 13.6 billion rubles and 17 billion rubles ($395 million to $495 million). The actual amount depends on how many VeroPharma shares Garden Hills holds when the deal closes. Abbott expects the holding company to own more than 95% of VeroPharm by then.

While Abbott has had a presence in Russia for almost 40 years, the new deal will vastly expand its footprint there. VeroPharm will bring three manufacturing facilities in the country and a portfolio of meds to treat women's health, central nervous system disorders and cardiovascular problems, among others. Altogether, Abbott expects its new buy to contribute $150 million to 2015 sales.

"Russia's middle class is growing, and when the middle class grows, the sector that grows is healthcare," one trader told Reuters. "There is an aging population and it is a country that really needs good pharma. If you want to get a part of that market you've got to be a local producer and this is a way for Abbott to be locally producing."

Abbott has a wealth of experience in buying up generics makers in developing countries it wants to penetrate. Most notable was its 2010 pickup of India's Piramal Healthcare, which vaulted it to No. 1 in India's drug market with a 7% share. More recently, it purchased Chile's CFR Pharmaceuticals to give its generics business a Latin American boost, agreeing to buy out that company for $2.9 billion last month.

Foreign drugmakers have stayed away from Russia lately, with economic struggles and the Ukraine crisis leaving would-be acquirers wary. But that doesn't mean pharma M&A in the country has been stymied altogether: Last month, Russia's drug leader, Pharmstandard, agreed to acquire domestic biosimilars company Biocad after political events reportedly scared off once-interested suitors Pfizer ($PFE) and Amgen ($AMGN).

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Special Reports: Top 10 generics makers by 2012 revenue - Abbott | Top 11 Fastest-Growing Generics Companies - VeroPharm