Daily analyst comments

According to Kommersant, Roman Abramovich's businesses, in particular, Millhouse Capital, are in talks to buy a blocking stake in Veropharm on the open market. The newspaper has reported that the proposal was made to clients of Troika Dialog, which managed an IPO for the company in April 2006.

We are not surprised at the interest displayed by Millhouse in the pharmaceuticals industry, as the company previously held a share in Pharmstandard. The interest is justified as Veropharm continues to expand its sales and profit margins with a boost in the share of revenues gained on prescription drug sales. We believe that the interest taken by the major fund in Veropharm shares, as well as the possible consolidation of the company's shares on the open market, may lend a substantial support to its stock valuations in the short-term. If the acquisition of a blocking stake goes ahead, we view Millhouse Capital as the main contender for the takeover of Veropharm from Pharmacy Chain 36.6 (the deal has long been rumored on the market). The way we see it, the takeover of the controlling interest may provide a boost to shares in both Veropharm and Pharmacy Chain 36.6. The latter would specifically be able to raise the funds it needs to refinance its debt.

According to our estimates, Veropharm shares are currently fairly valued on the market. Our target price for the shares is USD 28.3 per share.