Country Report: Ukraine - Pharmaceutical Executive

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Country Report: Ukraine

Pharmaceutical Executive


Interchem: Ukraine's Scientific Excellence Endures

Based in the port city of Odessa, Interchem originated as a project conceived by five post-graduate students at Ukraine's National Academy of Sciences in 1989. At that time, Ukraine possessed the most talented scientists and chemists within the entire Soviet Union, as they were the ones that drove the innovation of soviet medicines. Initially, Interchem produced chemical compounds out of makeshift facilities, where temperatures dropped to -12C, and stumbled upon API production by chance to later formalize its manufacturing of pharmaceutical products in 2003.

"We gradually entered the pharmaceutical area, as a producer of APIs due to the fact that we were dealing with a lot of biological chemistry. APIs are still a part of our activity and this makes us quite unique from other producers in Ukraine. Due to our chemical backgrounds, we were discovering new compounds of APIs and strived to introduce new innovative products. Today, we have one of the best levels of finished medicines production in this country and have GMP certification," recounts Anatolyi Reder, CEO of Interchem.

"Initially we were producing 100 million tablets a year. We very quickly multiplied our production fourfold by 2007, working seven days a week, 24 hours a day, without any holidays. At that point we realized that we had to expand, so we halted production for five weeks for renovation, and when the workers came they were very impressed by the new facilities." Reder remains modest in saying that "we are still a small to mid-size producer with 500 employees and a turnover of US $63 million. Our growth since 2003 has never been less than 35%, and in 2011 we even experienced 42% growth. It is quite a hard task to keep the KPIs so high." In order to do so, the company is currently expanding its facilities once again, with a total investment of approximately US $40 million. "We are adding four more buildings, one of which will be eight stories high, and overall the expansion will make our power four times of its current figure. We will also have a new chemical building which will allow us to have GMP certification for APIs. All the laboratory facilities will be under one roof, which is quite a task since they are currently all situated in different parts of Odessa."

Even though the company today exports to Georgia, Azerbaijan, and Russia, they are counting on the Ukrainian market to drive the bulk of their future growth. "The only element missing which makes it more challenging is to set up the public opinion, which is formed both by the government and public associations explaining to people that our quality is equal to that of foreign companies," concludes Reder.

Darnitsa: Leading by Example

The most radical changes to Ukraine's pharmaceutical sector are witnessed within the headquarters of some of the flagship national producers. Darnitsa is not only the leading Ukrainian manufacturer in terms of units sold, but is also the company that is undergoing the greatest overhaul of its operations to professionalize itself under international standards. Having taken over from his father as CEO of Darnitsa in 2009, Glib Zagoriy explains that "we wished to restructure our business to make it as professional and competitive as possible. At some point we realized that the Ukrainian pharmaceutical companies, while very powerful in the local market, are not interesting for Big Pharma for a number of reasons." Referring to the multiple challenges of the local market, Zagoriy feels that Ukrainian companies remain bound to their soviet legacy and are therefore incapable of truly competing at a global level.

Perhaps more importantly, Zagoriy wishes to demonstrate that Ukrainian companies can be competitive while being fully transparent and ethical. "Up until 2011, Darnitsa was focused on finishing its CAPEX project that essentially transformed our plant from an old soviet factory into a modern pharmaceutical production site under GMP standards. The project was developed together with a Swiss company in 2000 and it has taken us 11 years to complete. In parallel to the CAPEX plans we have also been restructuring our finances in order to become a debt-free company, which is where we stand today. This required that we learn how to be audited by international auditing companies like PWC, and to make all of our structures and processes fully transparent," he emphasizes.

Even though this restructuring is bound to attract potential buyers, Zagoriy affirms that the family has no intention of selling the company anytime soon, given that Ukraine's pharmaceutical sector is only at its infancy and the company wishes to be a part of its full blossoming. Furthermore, he advises that for "those companies that wish to grow through acquisitions, make sure that you are present here today so that you can learn how the market functions and what you need to do in order to be successful."


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Source: Pharmaceutical Executive,
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