Russia's Pharmstandard eyes buyers for $2.5B OTC drug business

In the market for over-the-counter drugs in Russia? Pharmstandard may have a deal for you. The country's biggest drugmaker, Pharmstandard is said to be weighing a sale of its OTC business, which could be worth $2.5 billion, Bloomberg reports.

With Russia pegged as one of the world's faster-growing markets, drugmakers have been angling to build up their businesses there. For free access to the market, the Russian government requires foreign drugmakers to team up with local companies--and to share technology with them. So, drugmakers large and not-so-large have made deals with or invested in Russian drugmakers.

Deutsche Bank analyst Natalia Smirnova told Bloomberg that Pharmstandard could well attract that kind of buyer, provided the price is right. "It may be a good entrance ticket to the Russian market," she told the news service.

Pharmstandard has already attracted buyout interest from one foreign drugmaker: Contacted a couple of years ago by Pharmstandard's biggest shareholder, the Russian oligarch Viktor Kharitonin, Germany's Stada jumped into merger talks. But despite the Russian government's backing for a deal, including capital for expansion, Stada's board ended up voting it down, worried that its Russian partners would be too powerful. Whether the Russian government would be on board with another deal is also a key question; officials nixed a recent Abbott Laboratories ($ABT) deal with the vaccines maker Petrovax.

Pharmstandard may want to unload the OTC assets to focus more on its growing prescription drug business. The company's cancer drug sales have been particularly strong. While Pharmstandard's prescription drug sales have been growing, sales of its own OTC drugs dropped last year by 4.5%, to 14.8 billion rubles, or about $451 million. But its sales of third-party OTC meds managed to grow by 30% to 28.3 billion rubles. Smirnova said she's unsure just how Pharmstandard plans to carve out its OTC business, however.

- see the Bloomberg story