Transcript Company name

Pharmacy Chain 36.6
Boston, April 23, 2002
Victor Sachs
Member of the Board
Director of Strategy and Business Development
Introduction to Pharmacy Chain 36.6
• Pharmacy Chain 36.6 - Russia’s
leading integrated healthcare company
• Listed on MICEX stock exchange since
30.01.03
Pharmacy Chain
36.6 OJSC
• First healthcare company to list in the
CIS
• Pharmacies 36.6 is Russia’s largest
healthcare retailer by revenue*
• Veropharm is Russia’s 3rd largest
pharmaceutical manufacturer*
• IAS turnover of US$53.4 million for 1H
2002
• Over 5,000 employees
• Strong management team with Western
and Russian backgrounds
1
* Source Pharmexpert
Pharmacies 36.6
Auxiliary
• Retail business
in Murmansk
• Small
distribution
business
Veropharm
Our History
1991
• JSC “Vremja” is
created to
distribute medical
products and
equipment,
including UKmanufactured
aspirin, to Moscow
hospitals
19911997
• Building drug
distribution
network, including
acquisition/
leasing of
traditional
pharmacies in
Moscow,
Murmansk and
other cities
• Acquisition of
pharmaceutical
plants in Belgorod
and Voronezh
2
1998
• Development of
branded
pharmacy
concept and
business plan
with McKinsey &
Company
• Creation of ZAO
Pharmacies 36’6
and opening first
branded
pharmacy 36.6
(November 1998)
• Creation of ZAO
“Veropharm”
• Exit from
distribution
business
19992001
• Opening of 28
branded
pharmacies in
Moscow
• Acquisition of
LENS-pharm,
leading oncology
drugs
manufacturer
2002-2003
• Restructuring of the
“Vremja” group and
creation of OAO
“Pharmacy Chain
36.6”
• Opening of
additional 14
branded
pharmacies in
Moscow by end of
2002
• Listing on MICEX
stock exchange in
January 2003
Pharmacies 36.6
36.6 pharmacies in Moscow
• 55 pharmacies in best Moscow locations
• Open-format stores, long hours,
customer service a key priority
• Over 1 million purchases/month
• Close to 200,000 customer loyalty
program members
• Centralized logistics and next day store
delivery of up to 13,000 SKU’s
3
Power of 36.6 Retail Brand
Brand awareness in Moscow
– July 2002
№ 4*
Attendance in Moscow
– July 2002
Purchases made in last 6 months
– July 2002
№1
№1
*after GUM, TzUM and Detski Mir
2001 EFFIE
Brand of the Year
Award in retail
sector in 2001
4
Source: Gallup Media
2001 Platinum
Ounce
2001 Best Chain of
the Year Award
2002 IABC
2002 Golden Chain Award
in Pharmacology and
Medicine
Veropharm
• 3 Production facilities in Belgorod,
Voronezh and Pokrov
• GMP-compliant production in
Belgorod (1 of 4 in Russia)
• High capacity utilization and tight
quality standards
• Over 250 products including
prescription and OTC drugs
• Number 1 in plasters and oncology
medicines with over a 90% market
share
• Number 3 in vitamins
5
*Source: Pharmexpert
• Over 6% share of Russian pharma
production in 1H 2002*
Strategy Going Forward
Retail dominance
• Rapid growth in Moscow
and major cities
• International best
practices in retail
management
6
Manufacturing
leadership
Related products
and services
• Higher margin directto-consumer sales
• Power of 36.6
brand
• Hospital sales
• Customer
knowledge and
traffic
Largest
integrated
healthcare
company in
Russia
Russian Pharmaceutical Retail Market
Russian pharmaceuticals retail market(1)
Pharmaceuticals consumption as % of
disposable income in 2001, PPP-adjusted
4,500
2.00
4,000
1.55
3,500
1,702
2,101
1,430
0.39
0.50
2001
1H 2002
Rest of Russia
Note: (1) Retail prices; only pharmacies sales, does not include
hospitals and reimbursements
Source: Remedium 2002
Source: Pharmexpert, Based on IMS Health,
Worldbank, national statistics. Includes
pharmacies, hospitals and reimbursements
Russia
2000
0.00
Poland
n/a
Hungary
399
Germany
343
Moscow
7
0.85
n/a
500
0
1.00
France
1,000
2,045
Japan
1,500
0.97 0.92
US
2,000
1.29
2,500
%
(US$m)
3,000
2,500
1.49
1.50
Changing Marketplace for Growth
Companies
• Market is consolidating, especially in retail
• Competition is intensifying requiring efficiency
• Legislative changes cause surprises requiring flexibility
- VAT in January 2002
- New drug certification rules in December 2002
- GMP compliance by 2005
Scale AND access to financing AND best
management talent = continued profitable
growth
8
Situation at 36.6 in mid-2002
• 2002 - key stage in our development in changing marketplace
- Powerful brand
- Leading positions in all markets we compete in
but
• Balance sheet in need of strengthening
• Need better access to debt and equity markets to support further
explosive growth
• Need “currency” for potential M&A
• Need new mechanisms of key employee performance management and
motivation through option plans
• Requirement to list in Russia before ADR/GDR listings
9
Next step: Private Placement?
• Private placement of shares
- Available to companies almost independent of
development stage
- No public disclosure
- Opportunity to discuss business in detail with investor
- “Long and winding” road
- Could be expensive for founders due to high ROI
required by private equity investors
- High level of control, sometimes with interest conflicts
10
Or maybe, IPO?
• Public Offering of Shares
- Restructuring and disclosure requirements
- Audited financials
- Distraction for Management resources
- Costly process
- Who knows …
- (Almost) predictable timing
- Better valuation and less control relinquishment
- Transparency and market valuation as means of access to new
capital
- First mover
- Who knows…
11
Process: Intense 6 months at 36.6
ОАО
Pharmacy Chain 36.6
• Unqualified audit and pro-forma
consolidated statements for 16 legal entities
for 1H2002
100
%
ZAO
Veroph
arm
99.9
%3
ZАО
Pharmaci
es 36.6
ZAO
Vremya
ОАО
83.27 Voronezh5%
khimpharm
• Beginning of transition to IAS
99.9%1
100%
ООО
LensPharm
50%
Marketing
Restruct
uring
98.2%2
ZAO
PharmState
Klada
Trust
100%
Klada
Ventures
Limited
100%
50%
20%
ZAO
FTK Vremya
80%
ZAO OP
Vremya & Co.
100%
OOO
Lekrin
95.13
%
Audit
Bene
ficiar
y
ОАО
Pharm
atsia
(Murm
ansk)
50%
ZAO
Nezabudka
6
Sassoon
ОАО
Marketing &
Apteka No. 1 Investments
18.98
88
Research Ltd.
%4 Presnenskay
a
• Cleaned-up and logical,
transparent structure
• Clarity in people behind the
business
Due
Diligence Prospectus
Stockholm
3
4, 5
London
Paris
6
Moscow
1, 2
3
Amsterdam
7
Frankfurt
Vienna
Geneva Zurich6
8
7
• 42 investor meetings in 7 working days
12
• Great meeting feedback
• Western-style disclosure
• Offering circular – a standard for the
pharmaceutical sector
Result: first European IPO in 2003
International offering of
ordinary shares
Announcement date
13 January 2003
Pricing date
30 January 2003
Start of trading
6 February 2003
Exchange
MICEX (Moscow Interbank
Currency exchange)
Size
US$14.4m
Number of shares
1,600,000 ordinary shares
Issue price
US$9 (RUR 286.2)
Float
20%
Lock-up
6 мес
Currently trades at…
$9.7
13
World Indices during pricing
Prices rebased to 100
Issue type
105
100
95
90
85
80
2-дек
9-дек
16-дек
23-дек
30-дек
Dow Jones
6-янв
NASDAQ
13-янв
20-янв
FTSE E300
RTS
Demand
Geography
 UK.
60.6%
 Russia
13.2%
 Rest of Europe 26.2%
27-янв
3-фев
Key insights: Those who do it, deserve
support
• Required disclosure, transparency, and
corporate governance – powerful selfdiscipline mechanism
• Market scrutiny and external analytics –
effective assistance in development
analysis and planning
• Benefits of public status outweigh the
direct and indirect costs – for
companies that are set on building
lasting businesses
14
1.
Great opportunity for
leading growth
companies to jump
ahead in respective
markets
2.
Great opportunity for
investors to earn
attractive mediumand long-term returns
by supporting best
companies and the
nascent IPO market