30 December 2019
The 2019 pharmaceutical sector indicators attest to an uptrend in the market. According to the analytical report by RNC Pharma, Russian pharmaceutical companies increased the volumes of drugs shipped over the first eight months this year. Output added 4.5% in physical terms and 20.2% – in money terms, reaching 2.83 billion packs and RUB 255 billion respectively. A major contribution to the production indicators of the Russian pharmaceutical sector is made by the companies operating in the Moscow Region accounting for around 24% of Russia’s total drug output.
This impressive concentration of drug manufacturers in a single region is not a coincidence. The Moscow Region has traditionally stood out for its overall industrial performance. Over the first eight months of 2019, the Moscow Region’s industrial production index rose by 12%, while the national industrial production index added a mere 2.6% on the average.
On the one hand, the Moscow Region has excellent historical premises for attracting investment in the industrial sector. The huge consumer market of the Moscow metropolitan area that is home to a high-income population of more than 20 million people by itself serves as a center of gravity for investors from most diverse sectors. In addition, the region has a highly developed transport infrastructure enabling effective logistics both inside the country and at the international level. Furthermore, the Moscow Region is a hub for human and scientific resources ensured by 8 science towns and over 100 universities.
On the other hand, the government of the region takes all reasonable effort to fulfil the potential on hand with maximum efficiency. Thus, the Moscow Region has created the largest industrial infrastructure in Russia – over 80 industrial sites will all necessary utility systems that industrial companies may need. The region has multiple investment support programs that promote the strategically important lines of business and a number of institutions that alleviate the effects of administrative barriers. All these facilitate rapid industrial growth in the Moscow Region, in particular, in the pharmaceutical industry. At that, the latter constitutes an important element of the region’s economy.
Science and Human Resources
The investor appeal of the Moscow Region’s pharmaceutical sector is due to high human capacity and scientific expertise in most diverse domains of medicine. For instance, Special Economic Zone Dubna in the north of the Moscow Region is among the centers of gravity for drug manufacturers. Dubna is one of the Moscow Region’s 8 science towns that focuses on nuclear research and development. This is the reason why pharmaceutical companies based on the expertise in nuclear medicine were among the first investors in the SEZ. Arguably, the best example of the projects implemented in this area is NanoBrakhiTek – a company that has developed and released innovative cancer drugs using the expertise of the Joint Institute for Nuclear Research (JINR) in Dubna.
In turn, the unique investment environment created in the special economic zone has attracted drug manufacturers engaged in the other lines of business to Dubna. Preferential land provision terms and minimum rent reduce the costs of launching new products. On the other hand, a lengthy period of preferential tax treatment providing for the minimum corporate income tax (2%) and zero property, land, and transport taxes facilitate rapid return on seed investment and effective breakeven of the new industrial facility. Combined with the science town’s scientific potential, the investment climate created in Dubna ensured a speedy establishment of one of Russia’s largest medico-pharmaceutical clusters in the SEZ.
PSK Pharma is among the major drug manufacturers that have launched production in SEZ Dubna recently. In late 2018, the investor completed the construction of its own factory and carried out the performance qualification of an inhaler manufacturing line. The company is planning to expand the range of its products up to 60 items. It is planning to invest RUB 2.3 billion in the project.
However, Dubna is not the only center of gravity for investors from the pharmaceutical industry in the Moscow Region. This July, NPO Petrovax Pharm obtained the report on conformity of its new production building in Podolsk, Moscow Region, to the requirements of technical regulations and design documentation. Commissioning of the new building will enable the company to increase the manufacture of active pharmaceutical ingredients by 2.5 times, tablets – by 7 times, and suppositories – by 4 times. The total investment in this project is estimated at RUB 1 billion.
Canonpharma Production CJSC is about to complete its investment project in the Shchelkovo Urban District of the Moscow Region. By the end of 2019, the investor is planning to commission a manufacturing complex for liquid and tableted dosage forms that will equally include a capsule area. Next year, the company is planning to reconstruct and retrofit the old production building.
This year, Biocad has localized the manufacture of an imported drug for hemophilia A by Takeda in the premises of its factory in the Moscow Region.
In late 2019, Avexima will complete the survey and design works for the project of a factory in Esipovo Industrial Park (Solnechnogorsk Urban District). The investor is planning to invest about RUB 3 billion in drug manufacturing.
Besides, PE Obolenskoe has commissioned a new pharmaceutical factory for solid dosage forms in Obolensk this year. The facility will manufacture drugs for the gastro-intestinal tract, cardiovascular system, musculoskeletal and nervous systems, antibiotics, and certain other drugs. The capacity of the new factory will reach 120 million packs, 1.6 billion tablets, 120 million capsules, and 15 million sachets per year. The company has invested RUB 3 billion in this manufacturing facility.
In a similar vein, Geropharm has announced the reconstruction of the manufacturing building at its injectables factory in Obolensk. The reconstruction project provides for the creation of a processing area for filling cartridges with insulin preparations.
This is the outline of investment highlights for the Moscow Region’s pharmaceutical sector in 2019. The Government of the Moscow Region hopes that the level of investment activity will be maintained in the years to come. This will be facilitated, inter alia, by the establishment of yet another major pharmaceutical center in the region. In particular, two major drug manufacturers are already operating in Obolensk and their growth rates are impressive. Several drug manufacturing facilities are expected to be erected in the south of the Moscow Region over the next few years. A new center of gravity for the pharmaceutical sector is about to be created in Pushchino – yet another science town located in the region.
Center of Gravity
Pushchino’s research expertise is concentrated in biomedicine and biotechnologies – the town has 9 R&D institutes specializing in this area. This is an excellent research and development base. In addition, Pushchino has an impressive talent pool for the pharmaceutical industry. Specifically, Obolensk-based companies have filled up their staff vacancies by hiring, inter alia, the residents of the science town. Obviously, Pushchino’s scientific potential and human resources are capable of ensuring fast returns subject to higher investment activity.
In turn, the Government of the Moscow Region is willing to encourage investments in biomedicine. For instance, the region provides research grants every year. Over the last few years, the region allocated RUB 263.23 million to 79 projects in grant support. At that, around 35% of program applications are accounted for by applications in the Medicine and Pharmaceuticals area. In 2019, the limit for research grants has been raised to RUB 10 million.
Yet another program of interest to drug manufacturers intended to commercialize innovations is implemented by the Fund for the Promotion of R&D Start-ups (Innovation Promotion Fund). Under its Cooperation program, the Fund allocates up to RUB 25 million for R&D work and commercialization of its deliverables to its applicants.
Federal Strategy Pharma 2030 will serve as yet another driver of Pushchino’s investment appeal, as it gives special attention to projects in the area of biomedicine and biotechnologies. The companies focusing on these areas will benefit from additional measures of government support.
As part of the effort to fulfill Pushchino’s research and production potential, the Moscow Region authorities are planning to establish a dedicated industrial site to localize drug manufacturers in the vicinity of the science town. Human resources, technologies, and special-purpose infrastructure concentrated in a single location and combined with government support measures will serve as strong investment incentives for drug manufacturers and support the growth of pharmaceutical products in the Moscow Region.
The institution in charge of attracting investments and supporting investment projects in the region is the Moscow Region Development Corporation. For instance, it was the Moscow Region Development Corporation who designed the industrial site of Pushchino biopharmaceutical cluster. Besides, the Corporation employees are engaged in negotiations with several investors interested in this location and advise potential residents on the government support measures available for their projects.
In the meantime, in its capacity of the region’s development institutions, the Moscow Region Development Corporation supports investors over the entire Moscow Region. For instance, Avexima’ project in Esipovo Industrial Park is equally supported by the Corporation. The Moscow Region Development Corporation works closely with SEZ Dubna that managed to localize a number of major investment projects with the Corporation’s assistance. The list of the Moscow Region Development Corporation’s functions expressly includes assistance with picking up the site for the manufacturing facility in the Moscow Region.
In addition, the Corporation provides investors with detailed information on the government support measures available in the region, assistance with preparing the documents to take part in the government support programs, and market data to make informed investment decisions. Ensuring the interface with the government authorities is yet another function of the Moscow Region Development Corporation enjoying high demand. Based on a one-stop shop principle, the Moscow Region Development Corporation ensures prompt communication between investors and all government entities involved in the implementation of investment projects one way or another.
The market, human resources, technologies, infrastructure, government support measures, and professional support are the key markers of the Moscow Region’s investment appeal to the pharmaceutical business. These benefits have been duly appreciated by those economic agents who have concentrated around 25% of Russia’s total pharmaceutical industry capacities in the Moscow Region. And yet, the sector is continuously growing and the Moscow Region is eager to foster cooperation with new investors.Print
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