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Pharmstandard Slumps Most in Week as Buyback Ends: Moscow Mover

OAO Pharmstandard fell the most in a week after Russia’s biggest pharmaceutical company completed a $247 million share buyback.

Global depositary receipts dropped 4.8 percent, the most since July 11, to $12.27 by the close in London after earlier tumbling as much as 11 percent. In Moscow, the shares retreated 3.4 percent to 1,672.1 rubles after slipping 0.5 percent yesterday.

Pharmstandard tumbled in 45 percent in London and 34 percent in Moscow from July 8 to July 11 after the company said it offered $630 million for Bever Pharmaceutical Pte Ltd., without disclosing why, and announced the spinoff of its own branded, non-prescription drugs business.

The drugmaker completed its buyback after boosting ownership to 73 percent. It bought 9.9 million GDRs after the July 8 slump, or 66 percent of total stock purchased since the program was announced in February, according to a statement.

“We continue to see the developments at Pharmstandard as strongly negative for minorities,” Mikhail Terentiev, an analyst at Otkritie Capital, said in an e-mailed note. “The stock has essentially become un-investible due to what we see as poor corporate governance.”

Pharmstandard will offer to buy out shareholders who vote against the planned spinoff of its over-the-counter unit for 2,180 rubles a share, equivalent to $16.79 per GDR.

“Taking into account the minorities who will likely vote against the spinoff at the general meeting on Sept. 27 and are to be bought out, the affiliated parties’ holding comes to 76.4 percent,” VTB Capital analysts led by Ivan Kushch said in an e-mailed note. “We therefore see legitimate grounds for a mandatory tender offer to minorities.”

Russian law requires an entity or individual whose ownership in the company exceeds 75 percent to make a mandatory buyout offer to the minorities.

During the buyback, unit OJSC Pharmstandard-Leksredstva raised its holding to 18.7 percent, while Augment Investments Ltd., controlled by Pharmstandard Chairman Viktor Kharitonin and board member Yegor Kulkov, increased its stake to 54 percent.

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