Pharmaceutical companies’ interest in furthering their positions in emerging markets is no secret, and this past week, two companies, Novartis and AstraZeneca, offered updates of current projects in one country, Russia.
Last week, Novartis broke ground on a new pharmaceutical manufacturing plant in St. Petersburg, Russia. The new facility is the largest investment by Novartis in Russia to date and is part of a $500-million, multiyear investment in Russia that covers three areas: local manufacturing, research and development (R&D), and public-health development. The facility, which is scheduled to be completed by 2014, will produce innovator and generic drugs and will have annual capacity of 1.5 billion units.
Also, last week, AstraZeneca announced plans to establish a Predictive Science Center in St. Petersburg, the company’s first such center in Russia. The center will focus on developing bioinformatices, data-analysis methods, software, and systems to evaluate safety and efficacy of new drugs. Approximately 30 people will be employed at the center through local collaborations and organizations. Earlier this year, AstraZeneca began construction of a new $150-million manufacturing facility in the Kaluga region in Russia to supply locally produced medicines. The company also has partnerships with several R&D institutes in Russia, including the the Skolkovo Innovation Center and Russia Venture Company, for research and clinical trials.
Among emerging markets overall and the BRIC (Brazil, Russia, India, and China) countries specifically, Russia is an interesting proposition for the pharmaceutical industry. Like its BRIC brethen, Russia’s pharmaceutical industry has experienced and is expected to continue showing strong growth, In 2010, the Russian pharmaceutical market was valued at $13.6 billion and had increased at a compound annual growth rate (CAGR) of 20% between 2006 and 2010, according to IMS. Russia is expected to move into the tenth spot among countries in pharmaceutical sales by 2015, when the country’s drug market is expected to reach between $23 billion and $28 billion, showing a projected CAGR of 11–14% between 2011 and 2015, according to IMS.
But unlike other BRIC countries, such as India and China, which have a domestic manufacturing base, Russia is largely dependent on pharmaceutical imports. Its domestic biomedical industry accounts for only 0.2% of the global market, but the country is committed to change that through an ambitious program, Pharma 2020. Pharma 2020, a state-initiated plan, seeks to boost output of local medicines from 25% of gross sales in 2010 to 50% by 2020, upgrade domestic pharmaceutical manufacturing operations to GMP standards, and increase the level of innovator pharmaceuticals in the Russian market (1). Although the feasibility of the government’s plan has been questioned by some as not offering realistic targets, the plan creates a framework that influences the large pharmaceutical companies’ strategies.
Unlike other countries, such as India, where Big Pharm has partnered with domestic pharmaceutical companies to access local markets and other emerging markets, several Big Pharma companies have announced direct investment in Russia. In addition to Novartis and AstraZeneca, for example, Sanofi announced in late 2009 that it is participating in the Pharmpolis Project, a state initiative to localize drug manufacturing, through Sanofi’s new insulin factory in Russia. In 2010, Sanofi bought a controlling interest in the Russian insulin producer Bioton Wostok. In late 2010, GlaxoSmithKline formed an alliance with JSC Binnopharm for local secondary manufacture of several GSK vaccines in Russia with GSK supplying the bulk vaccine and related support and technology.
The concomitant goals of Russia to localize its pharmaceutical manufacturing, upgrade domestic manufacturing operations to GMP standards, and boost innovative drug research is a likely recipe for continuing Big Pharma investment in Russia.
1. G. Peach, “Russia Pledges $4 billion for Pharma-2020 Plan,” Nature Medicine doi:10.1038/nm0511-517 (2011).