Aurobindo Pharma through its investment holding subsidiary (hereinafter referred to as “Aurobindo”) and OJSC DIOD, a Russian manufacturer of ecological healthcare equipment and nutrition supplements through its investment holding subsidiary (hereinafter referred to as “Diod”), announce establishment of a joint venture in Russia on a parity basis (50%:50%). The name of the Joint Venture (JV) is Aurospharma Company (hereinafter referred to as the JV). It is established to manufacture and sell the pharmaceuticals in the markets of Russia, Belarus and Kazakhstan.
As a part of this cooperation, the JV intends to construct a state of the art plant to manufacture non penicillin and non cephalosporin Rx generics and other drugs that are categorized as Over The Counter (OTC) products in Russia. To harmonize interests of the JV partners in the Russian market environment, it has been contemplated to transfer 100% interest in the CJSC Olifen (engaged in production of pharmaceutical substances) being held by DIOD to the JV company subject to due diligence. In addition, the JV shall source Penicillins, Cephalosporins and few other therapy products manufactured by Aurobindo Pharma, India to sell in the markets of Russia, Belarus and Kazakhstan.
The plant to be built in Russia will focus on production of socially significant medicinal drugs. This project fully complies with the priorities of the Strategy for Development of the Russian Pharmaceutical Industry for the Period through 2020 (Pharma-2020 Strategy) approved by the Russian Ministry of Industry and Trade, since it indeed helps make the Russian public healthcare less dependent on import of finished dosage forms. Once implemented, the project would bring about substantial savings for the programme of government procurement of socially significant medicinal drugs and reduction of applicable budgetary expenses. Consequently, this should make modern pharmaceuticals more affordable and accessible to the public at large in the countries-members of the Customs Union. A number of Russian public organizations also support the project. It is important to realize that the project will help the government to save considerable budgetary funds since instead of buying expensive original drugs it could buy generics, which are no less efficient, but are much cheaper than the original drugs. More Russian citizens will get access to therapy every year.
The plant meeting the GMP standards (using Aurobindo's expertise), will be constructed in the Podolsk District (Moscow region). It is expected that the construction will be completed and the plant will attain its rated capacity closer to the end of 2013.
Vladimir Tikhonov, Diod CEO, commented: “Diod has made a journey towards this partnership, lasting for many years. We believe that the establishment of the JV should allow us to become an important player at the Russian pharmaceutical market within the target period. Diod intends to enrich this project with its unique long-term experience in selling medicinal drugs and nutrition supplements in the markets of Russia, Belarus and Kazakhstan and support it with its own distribution network resources and streamlined channels of interfacing with medical organizations.”
While commenting on the arrangements to establish the JV, Vishnu Sriram, associate vice president of Aurobindo, said, “Establishment of a JV with the Russian Diod company perfectly weds with our international expansion strategy, in accordance with which we establish partnership relations with competent local companies in the target countries. The JV format gives us an opportunity to localize our production in Russia. Using the Russian partner's marketing vision, we will be able to enter the growing and challenging Russian market with greater confidence and expedite our presence in the market. Aurobindo will enrich the JV with its successful international experience in manufacturing medicinal substances and drugs – the so-called generics.”