Pharma Majors Build Manufacturing Capacity in Russia

Pharmaceutical companies are increasing their investment in Russia as that country’s pharmaceutical industry, like other emerging markets, are expected to see strong growth. Encouraged by a state plan to increase domestic production and R&D in Russia, pharmaceutical companies are making greenfield investments as well as partnering with local companies as a means to access Russia’s pharmaceutical market.

Russia’s role in pharmaceutical industry growth

Russia’s pharmaceutical industry growth is part of shifting industry growth from developed markets to emerging markets. Annual global spending on medicines will reach nearly $1.2 trillion by 2016, according to the IMS Institute of Healthcare Informatics. In the developed markets, including the United States, Europe and Japan, spending will decline to 57% of the global total due to expiring patents for a number of significant brand-name drugs, slower increases in spending on branded products, and increased cost containment measures by payers. Alternatively, so-called “pharmerging” markets will reach 30% of global spending by 2016, as population and economic growth contribute to dramatically higher use of medicines in these markets. The pharmerging countries, which include the major emerging markets of the BRIC (Brazil, Russia, India, and China) countries and second- and third tier emerging markets, are expected to nearly double their pharmaceutical spending by adding $150 billion and $165 billion in growth by 2016, according to the IMS Institute of Healthcare Informatics. Among the BRIC countries, China’s pharmaceutical market is expected to be the largest and reach $161 billion by 2016, followed by Brazil at $47 billion, India at $29 billion, and Russia at $27 billion, according to IMS. Russia’s pharmaceutical market was ranked eleventh in 2011 and is expected to move to the ninth position by 2016, surpassing established markets of Canada and the United Kingdom, according to the IMS Institute for Healthcare Informatics. Russia’s pharmaceutical market is expected to reach $27 billion by 2016, increasing by $10.7 billion between 2011 and 2016.

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). Several pharmaceutical majors are increasing their presence in Russia with manufacturing and R&D investment.

Pharmaceutical companies position in Russia

In September 2012, Takeda Pharmaceutical completed construction at its pharmaceutical manufacturing facility in Yaroslavl, Russia. The company has invested approximately EUR 75 million ($97 million) in the 24,000-m²production plant, which is expected to be fully operational by 2014. The plant, which is approximately 280 kilometers from Moscow, is one of the first by a major multinational company in Yaroslavl’s pharmaceutical cluster.

The Yaroslavl facility will enable Takeda to meet demand in Russia initially for several products: Cardiomagnyl (acetylsalicylic acid and magnesium hydroxide), Actovegin (derived from calf blood), and calcium tablets. The plant will have the initial capacity to manufacture 90 million sterile ampuls and more than two billion tablets per year. Liquid-sterile production includes solution preparation, washing of ampuls, sterilization, filling, inspection, and packaging. Solid production will encompass all stages, from weighing, mixing, and granulation through compression, coating, and packaging. The company expects to create 200 managerial and technical jobs during the next three years with the new plant.

Takeda estimates that it is the seventh largest pharmaceutical company in Russia and expects company annual growth rate of 15% in Russia between 2012 and 2016. “The completion of this ambitious project further demonstrates Takeda’s transition into a truly global business, and strategic investment into key emerging markets, such as Russia, is a major part of this strategy,” said Yasuchika Hasegawa, president and CEO of Takeda Pharmaceutical, in a Sept. 11, 2012, company press release. “Russia is our largest emerging market in terms of revenues and is expected to contribute significantly to our growth over the next few years.”

In April 2012, Novo Nordisk broke ground today on a new $100 million plant in Russia that will formulate and fill insulin into Novo Nordisk’s Penfill cartridges and pack the FlexPen prefilled insulin delivery device for the Russian market.Located in Grabtsevo Technopark in the Kaluga region, the plant is expected to start manufacturing in 2014. The company's intention to establish insulin production in Russia was first announced in April 2010 during the visit to Denmark by Dmitry Medvedev, President of Russia. At that time, an agreement of cooperation between the Government of the Kaluga Region and Novo Nordisk was signed. Sanofi also recently increased insulin capacity at its facility in Orel, Russia. Sanofi obtained the facility following its acquisition of a controlling stake in the pharmaceutical company Bioton Vostok in 2010.

Novartis is proceeding with a new $140-million manufacturing plant for pharmaceuticals and generic drugs in St. Petersburg, Russia. The plant is expected to produce approximately 1.5 billion units per year (oral solid dosage forms). The new greenfield facility is in the Novoorlovskaya Special Economic Zone located to the north of the St. Petersburg city center. Novartis began construction of the facility in 2011. The facility is expected to be completed and approved for commercial production in 2014.

The facility is part of a $500 million five-year investment into Russian healthcare infrastructure announced by Novartis in December 2010. This plan addresses three core areas: local manufacturing, R&D collaborations, and public health development in Russia. These activities include collaborations with both universities and academia, but also with emerging Russian private business in different areas of medical science. The scope of these collaborations may include such efforts as out-licensing of Novartis compounds to Russian companies with proven scientific capabilities, in-licensing and scouting for promising drug candidates from Russian scientists and universities, and modeling and simulation activities for clinical trials. Novartis is actively working in all of these areas, identifying high potential projects to be jointly developed. Additionally, Novartis also has made a commitment to double its investments in drug development in clinical trials in Russia and expects to enroll approximately 4000 individuals by the year 2013, said the company in announcing its plans in December 2010.

In 2011, 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. Also in 2011, 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.

Abbott Laboratories signed an agreement in July 2012 for several R&D projects in Russia with the country's ChemDiv Research Institute (CDRI). The first collaboration between CDRI, the research entity of ChemRar Hi-Tech Center, and Abbott will focus on creating an advanced new formulations of existing Abbott's pharmaceutical products. CDRI and Abbott are also discussing regarding several programs for joint small molecule medicine's development and enhancement. ChemRar's R&D company, Intellectual Dialog, also launched a research project with Abbott aimed at prevention and treatment of selected viral diseases impacting children and the elderly. Intellectual Dialog will conduct discovery research in collaboration with Abbott.

In July 2012, Pfizer granted exclusive development and marketing rights to Russian firm SatRx for its dipeptidyl peptidase-4 (DPP-4) inhibitor PF-00734200 for Type 2 diabetes.SatRx, which is part of the ChemRar Hi-Tech Center, received worldwide rights (excluding China) to the drug as monotherapy or in combination with other diabetes drugs. Pfizer will receive royalties and milestone payments based on commercialization activities. The agreement was developed as partial fulfillment of a memorandum of understanding reached in March 2011, under which Pfizer and ChemRar agreed to explore collaborations focused on research, development and commercialization of innovative compounds and vaccines to treat cardiometabolic, infectious and oncologic diseases in Russia and other countries.In 2010, GlaxoSmithKline formed an alliance with JSC Binnopharm for the local secondary manufacture of several GSK vaccines. Under this alliance, which was announced in November 2010, GSK will supply bulk vaccine and provide technology and expertise to enable Binnopharm to undertake the secondary manufacture, including filling and packaging of GSK vaccines. Binnopharm will be responsible for gaining approval of their facilities to allow supply of GSK cervical cancer, rotavirus, and pneumococcal vaccines under Binnopharm's trademark for the Russian public market.

Reference

1. 1. G. Peach, “Russia Pledges $4 billion for Pharma-2020 Plan,” Nature Medicine online, doi:10.1038/nm0511-517 (2011).