Russia Report: Build and Create: The Reinvention of a Screwdriver Assembly Industry - Pharmaceutical Executive

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Russia Report: Build and Create: The Reinvention of a Screwdriver Assembly Industry


Pharmaceutical Executive


What does innovation mean to this business? Nekrasov maintains, "Our definition of innovation is analogous to the internationally understood definition of the term, used by the large research-based pharmaceutical enterprises." In detail: "Innovation is first of all the creation of novel molecules, which have no analogue in the world. It is the patenting of these molecules, substances, and compounds. It is the development of these molecules, and their formulation into finished medicinal products. These products, patented in Russia and abroad, are then commercialized, and it is up to our sales and marketing staff to derive an economic effect from such innovations." Indeed, we are not speaking of innovation in packaging.

Petrovax is exemplary. As Nekrasov describes, the company is an archetype for government ambitions. "With the government announcement of the Pharma 2020 strategy toward domestic innovation, we find ourselves fully aligned with national goals. However, we have worked for over 30 years in this direction—long before the 2020 initiative. We have also long preempted the government drive toward high technology, high research standards, high manufacturing standards, and international collaboration. This fact is well exemplified by our partnership with Abbott, (formerly Solvay Pharmaceuticals) with whom we have been collaborating for approximately 10 years."

The company recently signed a partnership agreement with Pfizer, and will undertake contract manufacture with the aim of import substitution—including technology transfer. "But we do not want to be just contract manufacturers for our partners," Nekrasov emphasizes. "We want to also engage in licensing deals: for example, wherein a foreign partner licenses a product to us, and we develop the product full-cycle going forward. And ultimately, as an innovative company, we are most interested in joint development projects, using our adjuvant platform technology for vaccines and protein conjugation technology to develop next generation biologics."

"A final portion," Nekrasov concludes, "of the authorities' strategy is to increase the export efforts of Russia's pharmaceutical companies. This is again a direction that we are working in. Our high standards, meeting international requirements, allow us to compete abroad. While Russia is our main focus, we are actively expanding our horizons."

While most other domestic players have a long path ahead to attain Petrovax's success, they are indomitable. Vadim Muzyaev, the president of Protek—arguably the largest pharmaceutical enterprise in Russia, comprising production, distribution, and retail sales—leaves investors with the following image of the Russian market: "Russia is an emerging economy. In GDP per capita, we cannot yet match Western markets. At the same time, any world economist would maintain that Russia has a great future, and is dynamically evolving. Within this frame, the pharmaceutical industry will too grow very quickly. The greatest impetus for this industry, as defined by government, will be Pharma 2020. Soon, the proliferation of domestic medicines on this market will be quite a bit higher than it is today.

"Furthermore, with the growth of the economy, we expect a rise in the purchasing power of Russian citizens. Simultaneously, the price of medicine will grow—not due to inflation, but because quality will improve. The Russian pharmaceutical market will, in our view, grow by more than 10% per year. This will allow companies in our sector to realize their potential. Within the next five years, I suspect that we will see several Russian pharma companies commit to IPOs. This will confirm the attractiveness of the Russian pharma market."

The SPFO's Gennady Shirshov offers, simply, and finally, this: "The question you may be asking yourself is, 'Will Russia succeed or not?' We will see. It is important to take the first step."


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