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Aurobindo forms Russian joint venture with Diod

Indian drugmaker Aurobindo has formed a joint venture with Russia's OJSC Diod in order to tap into the local market for prescription and over-the-counter medicines.

The venture - to be called Aurospharma - could also help Aurobindo overcome potential reimbursement issues for overseas-made drugs in Russia.

The Indian company is following in the footsteps of a number of pharmaceutical majors in setting up production capacity within Russia, after the publication in 2009 of a government concept paper which suggested preference would be given to domestically-made medicines in the national reimbursement system.

The objective was to reduce Russia's reliance on imported medicines, which at the time the paper was published was running at around 80%. The overall target is to serve around 50% of the country's medicine needs with locally-made drugs by 2020.

At the heart of collaboration between Aurobindo and Diod is the construction of a new manufacturing facility near Moscow that will be used to produce medicines for distribution in Russia and its customs union partners. The facility is expected to be complete in 2013 and start producing medicines commercially in the first quarter of 2014.

Aurobindo will bring its manufacturing expertise to the table while Diod will contribute "its unique long-term experience in selling medicinal drugs and nutrition supplements in the markets of Russia, Belarus and Kazakhstan", according to the Russian company's chief executive Vladimir Tikhonov.

In addition, Aurospharma will gain control of OJSC Olifen, a company which manufactures pharmaceutical ingredients and intermediates.

The partner companies said the aggregate market in Russia for the types of medicinal drugs that they intend to manufacture and market is about $1.9 billion as of the end of 2010, with sales growing at 15% per year on average. They hope to capture market share of around 10-15% in the sector.

"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," said the partners.

The plant would help Russia's government save money and improved access to medicines for Russian citizens, they added.


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