Get the Latest Investment Ideas Delivered Straight to Your Inbox. Subscribe

Russian Biotechs Emerging from Behind Iron Curtain with Innovation

Share on Stocktwits

Source:

"A handful of strong, yet relatively new, Russian biopharma companies, led by R-Pharm and Pharmstandard, are poised to exploit Russia's BRIC status as a premier emerging drug market as they expand their ranges, hoping to conquer the international biotech market."

A string of first-ever events for Russia, including its official admittance to the World Trade Organization and legislation submitted in the U.S. House Committee on Ways and Means to authorize and extend the country's Permanent Normal Trade Relations status, plus committed government support to build a biopharma industry, means the nation once known as the Kremlin may be in need of a more modern nickname as it transforms from an emerging market to one that could compete alongside the U.S., Japan and Europe.

Those events also could be followed by another "first" that would truly mark the emergence of Russia as a major player in biopharma: an FDA office in the country.

It's not on the table right now—at least not in public discussions—but the FDA has said it is committed to expanding its presence beyond the U.S., and Russia is a glaring exception to its international presence in emerging markets.

The FDA has multiple offices that the other BRIC member countries can access, with three in China, two in India and six in Latin America.

There are three FDA posts in Europe, but they attend only to European Union member countries, which means Russia is currently the lone BRIC nation with no FDA involvement.

The Russian pharmaceutical space comprises approximately 20% novel drugs, 45% traditional drugs and 35% generics, while 76% of that total capacity is imported and 24% is domestically produced.

But domestic innovation is increasing, and is likely to be given an additional boost as Western relations and global market opportunities continue to respectively thaw and as Russia's government steps in to actively guide drug development endeavors, according to Maria Nilova, a patent attorney and founding partner at Patentica, a St. Petersburg, Russia-based intellectual property firm, and a consultant in Russia and CIS countries.

"To further promote and stimulate growth in its biopharma sector, the Federal Program for the Development of Pharmaceutical and Medical Industry was launched, with a budget of $6 billion (B), with 80% earmarked for R&D and 20% going to infrastructure," she told BioWorld Today.

"The goal is to achieve a $60B pharmaceutical and medical device market by 2020, with 50% of that total generated domestically and 90% of the essential drug list being produced in Russia," Nilova said.

"Companies will receive grants for R&D, clinical candidate testing and biopharma manufacturing, while infrastructure projects such as biopharma clusters and academic technology platforms and industrial enterprises using public-private partnerships will be an additional focus of the program," she said.

Nilova indicated biopharmas will likely be popping up all over the Russian Federation, as the government seeks to establish a wide swath for that market.

Apart from that, additional state funding is directed to creating pharmaceutical clusters in several regions in locations in St. Petersburg, Volograd, Stavropol and Altay, that will facilitate collaboration of existing R&D institutions and high-tech industry enterprises of the pharmaceutical industry.

Further clusters are planned in Zelenograd and Kaluga in the Moscow region, as well as in Rostov, Novosibirsk and other areas, Nilova added.

A handful of strong, yet relatively new, Russian biopharma companies, led by R-Pharm and Pharmstandard, both based in Moscow, are poised to exploit Russia's BRIC status as a premier emerging drug market, as they expand their ranges, hoping to conquer the international biotech market.

Relying on Growth to Keep Biopharma Local

R‐Pharm, founded in 2001, is expanding its repertoire to venture into biotech.

The company employs more than 1,400 people at 26 locations within the Russian Federation. R‐Pharm, which manufactures drugs and APIs, had revenue of $1.6B in 2011, increased from $1.3B in 2010.

Those statistics are impressive, considering many companies that young are still struggling to turn a profit, even in the U.S.

In 2011, R-Pharm signed an agreement with Xcellerex, a Marlborough, Mass.-based biomanufacturing platform and technology company, to use Xcellerex's FlexFactory biomanufacturing platform—an automated bioprocessing format that offers modernization in areas such as operating efficiency, flexibility and environmental controls—to upgrade its capacity to produce biologics more expediently than traditional drug development methods in Russia allow.

The aim is to attract foreign investment and, more importantly, international business development partners that are willing to establish operating roots in Russia.

Under the agreement, Xcellerex provides R‐Pharm with its FlexFactory production line, technology and training to facilitate cGMP operations that meet global regulatory requirements for production.

Compliance with international standards is a prerequisite for any nation seeking global basis, and such compliance is a relatively new aspect of Russian business development agenda.

And that investment may have return-on-investment legs, as R-Pharm recently struck a deal with its first big pharma. In June, the firm signed a licensing agreement with Merck & Co Inc., of Whitehouse Station, N.J., to develop Merck's narlaprevir, an investigational hepatitis C once-daily protease inhibitor.

In a move that usually only occurs in matters of national health emergency in the U.S., the Russian government actively participated in those agreement negotiations, signaling its ongoing commitment to following through with its Pharma 2020 plan.

The Russian government estimated that more than 2 million people in Russia are infected with hepatitis C virus and only 8% of diagnosed patients have been treated, thus creating a huge opportunity to address the indication.

Since 2000, several original drug molecules have been domestically developed and effectively marketed, including Arbidol, Russia's top-seller, an antiviral drug developed by Pharmastandard, which is popular in Russia and China and could thrive even more if recent trends in drug market globalization continue to erase that old East-West line in the sand.

Pharmastandard, founded in 2003, had revenues of $1.3B in 2011, an increase of 43% over 2010, and has more than 200 drug products on the market in Russia.

Since 2006, Pharmastandard's sales have increased 400%.

Michael Harris
BioWorld


Want to read more about Life Sciences Tools & Diagnostics and Biotechnology / Pharmaceuticals investment ideas?
Get Our Streetwise Reports Newsletter Free and be the first to know!

A valid email address is required to subscribe