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Russia set for first foreign CMOs as pharma preps for 2020 policy

By Dan Stanton+

09-Jul-2014
Last updated on 09-Jul-2014 at 15:46 GMT

CMO opportunities as Russia embraces its Pharma 2020 strategy
CMO opportunities as Russia embraces its Pharma 2020 strategy

Several international CMOs will establish themselves in Russia over the next few years as pharma looks to satisfy the country's manufacturing policies, the CEO of R-Pharm predicts.

Russia’s Pharma 2020 strategy was announced in 2009 with the stated aim of improving the competitiveness of drugmakers and promoting domestic manufacturing through a series of policies and incentives.

With targets of 50% of drugs on the market - and 90% of those on the Essential Drug List - to be made locally by 2020, Russia’s evolving manufacturing landscape could soon lead to the arrival of foreign contract manufacturing organisations (CMOs), according to Vasily Ignatiev, CEO of Russian drugmaker R-Pharm.

He told delegates at last month’s Global Pharmaceutical Contract Manufacturing (GPCM) summit in London that Big Pharma firms are pursuing a number of different strategies to ensure a slice of Russia’s growing market (currently estimated to be worth $21bn) - including building proprietary sites and partnering local manufacturers – and within the next few years “two or three pure international CMOs sites” are likely to be commissioned.

Whilst he told Outsourcing-Pharma he was unaware of any professional Western CMO currently pursuing a Russian site, he said the country “should see the first steps within the next 2-3 years.”

Slow Adoption

During a Q&A session, Ignatiev was asked why foreign CMOs had yet to have invested in Russia. “The Pharma 2020 was officially adopted at the end of 2010. It is recent and a lot of people are waiting to see how it is to evolve,” he explained.

Furthermore, “Russia is clearly not an easy market from a contract manufacturer’s perspective for entry,” he added, due to high facility costs, utilities and labour, especially when compared to other emerging markets.

"You probably will not be competitive with Chinese and Indian sites, but within Russia [itself] a professional CMO will definitely be competitive.”

CMO Competition

Approximately 350 facilities in Russia (50% of domestic production) are run by firms without contract manufacturing options, often ex-Soviet non-GMP compliant – despite Pharma 2020’s ruling for all plants to be cGMP compliant by 2014 - facilities making low priced products, Ignatiev said, based on data collected and summarized by the Boston Consulting Group (BCG).

A second set of Russian pharma firms (including R-Pharm) currently represent 35% share of domestic production from about 15 generally sites, he continued, and offer contract manufacturing services to foreign drug companies looking to benefit in the Russian market.

Examples of such partnerships include Bayer teaming up with Medsintez , and Moscow-based Binnopharm making and selling a number of vaccines for GlaxoSmithKline, whilst Roche and Pfizer are also pursuing such opportunities.

Finally, Ignatiev said that currently there were 11 plants operating that were either bought or built by international pharma firms directly. Examples of such include Takeda’s new $96m plant in Yaroslavl, AstraZeneca’s $150m facility in the Kaluga region, and, most recently Abbott’s $495m purchase of Verapharm.

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