Russia is one of the emerging BRIC countries that Big Pharma sees as the key to growth. It has a growing middle class, petro dollars to spend and a desire for better pharmaceutical options. So it was no big surprise that Abbott Laboratories ($ABT) wanted to buy out its vaccine partner in Russia to better establish itself there. But the Russian government has not exactly thrown its arms open to Big Pharma and Abbott's hope has now been dashed on the hard wall of that reality.
The head of the Russian antitrust regulator said today that it Abbott cannot buy Petrovax Pharm, Reuters reports. "The commission has reviewed the question about the sale to U.S. company Abbott of Petrovax Pharm. As a result of very lengthy discussion the U.S. company was denied to make this deal," Igor Artemyev of the Federal Anti-Monopoly Service (FAS) told reporters. Artemyev said keeping local control of vaccine-making was a national security issue and the decision was neither a slap at Abbott nor at the U.S. An Abbott spokeswoman told Reuters the company had yet to receive official word of the denial.
The Russian publication Izvestia last year reported that Abbott filed for approval to take over Petrovax by purchasing 68.5% of its shares. That included a 25% stake now held by the European Bank for Reconstruction and Development. Co-founder and CEO Arkady Nekrasov would sell his 18.77% stake, while fellow founder Natalya Puchkova would sell 18.74%. The rest of the shares are company-owned. Analysts figured the deal would be worth up to $294 million.
One reason to own a Russian company is that President Vladimir Putin wants to build up the country's domestic production. He has urged multinational drugmakers to not only ally themselves with Russian drugmakers, but to be prepared to produce their meds in Russia--and to transfer technology to their Russian partners. He has suggested the country might penalize imports. About 85% of Russia's state drug spending goes to foreign-made drugs. In 2011, 93% of the most expensive meds sold in the country were imported. Alongside Putin's demands came a pledge to amp up funding for drugs--by $3.9 billion--so that foreign investment might actually pay off.
So Big Pharma has been trying to face up to Putin's demands for a local presence. German Bayer in November said it had struck a strategic partnership with Russian drug manufacturer Medsintez to "jointly manufacture and commercialize" neural drugs and pharmaceuticals for infections as well as diagnostic imaging products. Novartis ($NVS), AstraZeneca ($AZN), GlaxoSmithKline ($GSK) and Novo Nordisk ($NVO) are among the drugmakers who are putting money into Russian infrastructure and partnerships, in a bid to secure their place in that market.
- here's the Reuters story