Industry, manufacturing | Technology & innovation

AstraZeneca injects $150m into Russia’s pharma market

2 Mar '11
Oleg Kouzbit, Online News Managing Editor

International pharma major AstraZeneca is coming to the Kaluga region with a $150m pharmaceutical project. In three years the new plant is expected to start making innovative drugs based on localized R&D. With the national pharma market growing at 10-20% a year and the RF promising to support domestic producers with new incentives, AstraZeneca’s $150m investment and product pipeline looks like a winning prescription.

Swedish-British biopharm major AstraZeneca has unveiled $150+m worth of plans for its new pharmaceutical site in the Kaluga region, some 200km south of Moscow. The project is scheduled to break ground in April and will be involved in research as well as production of a full line of GMP standard medicines.

The investor’s profile

AstraZeneca is a London-headquartered global biopharmaceutical major, ranking seventh by revenue last year among the world’s 12 largest producers. It had 2010 sales of $33.3bn, ending the year with a net profit of almost $8bn. The company with a global workforce of 62,000 people reportedly runs 26 large factories in 18 countries and has been building presence over the past years in the emerging markets, including BRIC (Brazil, Russia, India and China).

Their research and production focus is on six areas of healthcare that includes cancer, cardiovascular, gastrointestinal, infection, neuroscience, and respiratory and inflammation.

The firm is part of the FTSE 100 Index and is listed on the London Stock Exchange (LSE; primary listing) and the New York Stock Exchange (NYSE; secondary listing).

Supporting innovation

Nenad Pavletic, president of AstraZeneca Russia, told media the international major was coming to Russia with long-term strategies and had “faith in great prospects of work in Russia with its steadily growing economy.”

According to the investor, the Kaluga regional site is expected to come on-line at the Vorsino industrial park in the spring of 2013 and will manufacture GMP-standardized medicines to treat a full range of above maladies. AstraZeneca aims to establish full-cycle production from researching drug formulas to packaging the end products. Kaluga Governor Anatoly Artamonov has personally pledged full support.

The plant will have a projected capacity of 16 million packages a year and employ an estimated 145 people. With more than $4bn in the parent company’s global R&D spending each year, Mr. Pavletic said the investor also had plans to set up a sizable research and development department at the Vorsino site and, quote, “support Russian innovative ideas in fundamental sciences.”

Gaining a big foothold

AstraZeneca’s entry into the Russian market will enable it to compete on equal footing with Russian pharmas on lucrative RF tenders.

Foreign companies bidding on Russian government tenders routinely have to agree to a 15% discount—a rule the RF imposed two years ago to prop up domestic drug makers. Once the Kaluga project goes on stream, AstraZeneca Russia will be treated as a domestic drug manufacturer.

A healthy market and getting healthier

Russia’s pharma market is one of the world’s rapidly expanding; analysts put it on the Top-10 global list of largest pharmaceutical consumers. The market grew an estimated 18-20% y/y in 2010 to more than $25bn.

The RF has been stepping up effort to replace imports with local production in as many drug categories as possible. According to its latest strategy, by 2020 domestic makers are expected to produce $26+bn worth of Russian medicines a year. With a 10-20% annual upward trend remaining and the RF market for all sorts of drugs conservatively forecasted to be worth at least $50bn in ten years, Russian producers will then be expected to fill a rough 50% of national consumption.

Shifting focus from cranking out generics and relying on me-too medicines that most Russian pharmas have been content with for decades, the sector will reportedly have enough government incentives to start creating cutting-edge innovative solutions. The goal is for innovation to account for 60% of total domestic production.

With Russia’s current pharma exports at an anemic 0.04% of global demand, the new strategy envisions an eightfold boost in the country’s international presence. Injecting $150m right out of the gate, AstraZeneca’s entry into the Russian market looks just like what the doctor ordered.
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