Kaluga Russia sets itself up as drugmaking epicenter

A regional government in Russia, capitalizing on drugmakers' need to expand in that country, has four companies set to build manufacturing plants in a pharmaceutical hub it is creating.

Kaluga Gov. Anatoly Artamonov in a roundtable discussion says Denmark's Novo Nordisk ($NVO), British-Swedish AstraZeneca ($AZN), Germany's Stada and Italy's Menarini, have pledged to open manufacturing operations there, The Moscow Times reports. They join Russian drugmakers Nearmedic Plus and Sphera-Pharm that have already invested $500 million in production operations there. He told the group that the government has another four companies analyzing the area, which could bring investments there to $1 billion by 2020.

The city of Kaluga, which is about 90 miles southwest of Moscow, will be the center of the hub, but it will include development in two towns nearby, including a training center for the 1,500 people expected to be employed at the plants, Artamonov says.

Russia is seen as an important emerging market for pharmaceuticals. Hartmut Retzlaff, the CEO of German generic drugmaker Stada, has shown ambivalence about the Russian market, reportedly saying in March that the company might close two underperforming plants there but then in June indicating that he's expecting Stada's Russian sales to surpass domestic revenue by 2015.

There is no ambivalence by Novartis ($NVS) about tapping that potential. The Swiss drugmaker is building a $150 million plant outside of St. Petersburg. Novartis CEO Joseph Jimenez recently was pretty blunt about one of the reasons he felt compelled to invest about $500 million there. Jimenez told Dow Jones that "the government has been very clear that over time [foreign companies] ... will face hurdles." President Vladimir Putin has said drugmakers need to invest in manufacturing and transfer technology or face tariffs on their imports.

And some are heeding the call. Sergei Tsyb, head of the Russian Industry and Trade Ministry's department for chemical engineering and bioengineering technologies, tells The Moscow Times that foreign pharmaceutical companies have invested about $992 million in Russia in the last three years. That includes everything from investing in domestic companies to joint ventures to building manufacturing operations. 

- read The Moscow Timesstory

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