SSA.L Regulatory News (SSA)

Sistema and VTB to create a major pharmaceuticals holding

Moscow, Russia - 28 December 2018 - Sistema PJSFC ("Sistema") (LSE: SSA, MOEX: AFKS), a publicly traded diversified Russian holding company, announces it has acquired an equity interest in JSC Pharmaceutical Enterprise Obolenskoe ("OBL Pharm"), a leading Russian pharmaceutical company. The stake was acquired jointly with VTB Bank ("VTB") and management of OBL Pharm from Alvansa Ltd, which is majority-owned by Gazprombank and UFG Private Equity.

Sistema invested a total of RUB 1.83 billion in the acquisition of OBL Pharm, giving Sistema an effective stake in OBL Pharm of 11.7%.The investment consortium - consisting of Sistema, VTB and members of the OBL Pharm management team - collectively acquired 95.14% of OBL Pharm for a total investment of RUB 15.5 billion.

The partners made their investments through a joint holding company, Ristango Holding Limited, and have signed a shareholder agreement securing rights of all of the investors to participate in management of the business. Sistema and VTB have also signed an agreement whereby Sistema will acquire VTB's stake in Ristango Holding Limited within three years of the initial transaction.

The Russian Direct Investment Fund ("RDIF") and its co-investors have reached an agreement with Sistema to consider participating in the transaction in early 2019 following additional study of the transaction terms and approval of the transaction terms by an RDIF-led consortium of investors.

The transaction aims to create a leading Russian pharmaceuticals group following the merger of OBL Pharm with JSC Binnopharm ("Binnopharm"), a Sistema portfolio company. OBL Pharm and Binnopharm will be combined to create a unified company that is a top-10 Russian pharmaceutical company in the non-statesector with a diversified portfolio of over 200 products. Products that are leaders in their segments include vein tonic Venarus, the probiotic Maxilac and the liver protectant Urdoxa. The combined company will operate four pharmaceutical production sites in Moscow and the Moscow region, and will be established in the first half of 2019.

Andrey Dubovskov, Sistema President and CEO, said:

"The acquisition of a stake in OBL Pharm creates a unique opportunity for Sistema and its partners to establish a leading player in Russia's growing pharmaceuticals market by leveraging synergies with our portfolio company Binnopharm through joint use of production capacities, marketing and sales networks, and R&D capabilities. Binnopharm is a full-cycle biopharmaceutical company with its own in-house R&D division and modern production facilities. OBL Pharm is a fast-growing company that has an experienced management team and a well-developed portfolio of branded products. The companies also have complementary business models and assets, which creates further opportunities for a significant increase in the shareholder value of our pharmaceuticals business."

Yuri Soloviev, First Deputy President and Chairman of VTB Bank Management Board, said:

"As one of the leading companies in the highly prospective Russian pharmaceutical market, OBL Pharm has a strong track record in increasing its business operations and is pursuing ambitious development plans. The merger with Binnopharm will serve as a new impetus for further expansion. We strongly believe that VTB Group's broad experience and financial resources will significantly enhance the company's shareholder value and ensure attractive returns for both existing shareholders and potential new investors."

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OBL Pharm is a Russian pharmaceutical company engaged in the development, production and marketing of modern, high-quality pharmaceuticals in accordance with GMP and ISO standards. The Company was founded in 1994 and since 2013 has been part of Alvansa Group, in which Gazprombank and the UFG Private Equity Investment Fund are shareholders. The company specialises in the production of solid dosage form products, manufacturing more than 150 prescription and over-the-counter pharmaceuticals for gastroenterological, cardiologic, phlebologic and neurologic diseases, as well as for the treatment of pain, insomnia, men's health and more. The Company's portfolio includes both innovative and generic pharmaceuticals. Its production capacities include an existing facility in Obolensk, Moscow region with capacity to produce 330 tonnes of tablet mass annually. In 2019, the Company plans to launch another facility in Obolensk with total annual capacity of 900 tonnes of tablet mass.

JSC Binnopharm is one of Russia's largest full-cycle biopharmaceutical companies with an in-house R&D division. The company produces and develops new medications in several treatment groups including hepatitis B vaccine, interferons and erythropoetins, a line of pulmonology and neurology drugs, infusion solutions, and anti-viral and immunomodulating drugs. Binnopharm operates two production facilities: the Binnopharm production site in Zelenograd administrative district of Moscow and the Alium facility in Krasnogorsk district of the Moscow region. Its plants produce six types of dosage forms: ampoules, syringes, aerosols, pills, capsules and solutions. Binnopharm has over 20 different products in its portfolio. Another 40 drugs are currently in development or registration.

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For further information, please visit www.sistema.com or contact:

This announcement contains inside information. Full name and position of person making the announcement - Nikolay Minashin, Director, Investor Relations

Sistema PJSFC is a publicly traded diversified Russian holding company serving over 150 million customers in such sectors as telecommunications, retail, paper and packaging, agriculture, high technology, banking, real estate, pharmaceuticals, tourism and healthcare services. The company was founded in 1993. Its revenue in 2017 reached RUB 704.6 billion; its total assets equalled RUB 1.1 trillion as of 31 December 2017. Sistema's global depositary receipts are listed under the symbol "SSA" on the London Stock Exchange. Sistema's ordinary shares are listed under the "AFKS" ticker on the Moscow Exchange. Website: www.sistema.ru