The worldwide recession which has put pressure on pharmaceutical market of Russia and CIS countries during the last couple of years , have forced authorities to tighten regulations in these regions.
Currently the Russian pharmaceutical market is close to US $15 billion. Despite several odds , the Russian pharmaceutical market is set to achieve growth of 10-12 per cent in 2012, slightly lower than the growth of 2011.
The areas such as gastrointestinal, cardiovascular and anti-infectives are expected to drive growth with CAGR of 11 per cent each. With respect to biosimilars , the leading focus therapeutic areas are immunology and oncology in Russia. The OTC segment stands at 50 per cent by value and 73 per cent by volume. It is the largest OTC market and has registered highest year-on-year percentage change of 23 per cent in per capita OTC expenditure at the end of 2010.
The Russian government has declared 'Russia's Pharma strategy 2020' which aims at boosting innovation and competitiveness of pharmaceutical market. At present Russia is importing 70 per cent of its requirement of pharmaceutical products. It envisages enhancement of the domestic industry's production capacity by 50 per cent import substitution and substantial export capacity increase.
Indian pharmaceutical companies have established strong presence in CIS and Russian pharma market during last several years along with European pharma companies like Novartis, Bayer and Novo Nordisk. Indian pharma majors like Ranbaxy Laboratories, Dr Reddy's Laboratories, JB Chemicals and Pharmaceuticals, Torrent Pharma, Glenmark, Pharma, Ipca Laboratories, etc have established strong presence.
Ranbaxy has clocked sales of US$ 77 million in Russia with a growth of 13 per cent and US$30 million in Ukraine. It launched three new products viz., Fosinopril, Zidovudine and Midazolam during 2011. It has diversified its business operations in Russia with presence in three branded generic areas namely OTC, ethical and chronic. It is working closely in partnership with regional governments. It signed a MoU with Government of Yaroslavl for co-operation in the field of healthcare and medical science.
Dr Reddy's Laboratories has also established strong presence in CIS and Russia and its revenue grew by 22 per cent to Rs 1,326 crore in 2011-12 from Rs 1,086 crore, mainly due to volume expansion in existing products. It has built a strong OTC portfolio over the last four years. Some key OTC products include Cetrine, Senade and Nise Gel. The OTC contribution to total Russia and CIS revenues have increased from less than 10 per cent in FY2008 to about 30 per cent in FY2012, representing a growth of 33 per cent over FY2011. .
J B Chemicals and Pharmaceuticals has sold its Russia-CIS OTC business for Rs 761 crore to Cilag GmbH International, subsidiary of Johnson & Johnson during the year 2011-12. JB is supplying these OTC products to Cilag for Russia-CIS region pursuant to an agreement entered into with Cilag. The company now has prescription products business, which it has decided to retain and grow. The value creation in Russia-CIS is full of challenges as it involves both building a new marketing team as well as expanding the product basket, both of which would require investments. The company is now planning to exploit Rx market in this region.
Torrent Pharma's Russian subsidiary, ZAO Torrent Pharma achieved revenue of Rs 47.62 crore during 2011-12 as compared to Rs 36.02 crore in the previous year, registering a growth of 32.2 per cent. However it incurred a net loss of Rs 2.74 crore as against a net profit of Rs 12.99 crore . The company is taking steps to improve sales performance and to turnaround.
Glenmark is one of the fastest growing Indian pharma companies in Russia. Glenmark's Russian subsidiary registered strong growth in secondary sales. The company launched two dermatology products - Supirocin and Supirocin B in the third quarter of 2011-12, which paved the way for establishment of 'Glenmark Institute of Healthy Skin'. Its market share in the dermatology segment in Russia increased to 1.75 from 1.56 per cent .The positive trend of growth in secondary sales continued in other CIS markets of Ukraine, Kazakhstan and Uzbekistan.
In the meanwhile, Elder Pharmaceuticals, India's fastest growing pharmaceutical major, has signed a memorandum of understanding (MoU) with Russia’s PharmEco, which has presence in all major segments of pharmaceutical industry for bilateral co-operation in the field of healthcare.
The MoU between the two companies was signed as part of the Russian President Vladimir Putin’s visit for the 13th annual Indo-Russian bilateral summit.The MoU was signed between Alok Saxena, joint managing director, Elder Pharmaceuticals Ltd and Vladimir Babiy, chairman, PharmEco.
In the pharmaceuticals sector, where India has emerged as the most reliable supplier of quality generic drugs to Russia, potential for further co-operation is promising. Under Pharma 2020 programme of the Russian Government, leading Indian pharma companies have started talks with Russian partners to consider possibilities of joint investments.