June 20, 2016, 11:52 am / Business

R-Pharm will build a pharmaceutical complex in Azerbaijan

The company and its local partners estimate investments at 70 million euros Maria Dranishnikova The parties plan to build the first pharmaceutical complex in Azerbaijan on the territory of the pharmaceutical cluster / Denis Abramov / Vedomosti

The R-Pharm group, its partner Vita-A and the Azerbaijan Investment Company (AIC) agreed to build a pharmaceutical complex in Azerbaijan. The project will be implemented by a specially created joint venture Hayat Pharm, this company and R-Pharm reported. 45% of the shares in it belong to the Russian company, the remaining 55% belongs to Vita-A, which will subsequently assign 10% of the shares in the AIK company.

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The parties plan to build the first pharmaceutical complex in Azerbaijan on the territory of the pharmaceutical cluster, the report says. It will consist of production, laboratory and logistics blocks. The plant will be able to produce drugs for the treatment of oncological, hematological, autoimmune endocrine diseases, HIV/AIDS, viral hepatitis of various types, the words of R-pharma commercial director Andrey Burkhanov are quoted in the message.

The parties estimate investments in the project at more than 70 million euros. The parties will invest in the project in proportion to their shares, says a representative of R-Pharma. The company does not comment on how profits will be distributed. The joint venture will reach its full design capacity at the end of 2019, the parties expect.

The Azerbaijani market is the largest in the Transcaucasus, says Nikolai Demidov, head of IMS Health Russia and CIS. According to IMS Health, the retail market (sales in pharmacies) of Azerbaijan in 2015 amounted to $471 million, 33% less than a year earlier. The reasons are devaluation, decreased consumption and redistribution in favor of cheaper drugs, explains Demidov. 98% of the market is imported, expensive drugs are not sold or supplied, notes Deputy General Director of Stada CIS Ivan Glushkov. At the same time, the demand for medicines is huge, Demidov adds.

Now the country, according to Glushkov, is trying to create attractive conditions for investors by eliminating taxes. However, this is a small cost item, he adds. The difficulty is that parallel imports are allowed in Azerbaijan, and there is no incoming control over the quality of medicines in the country, says Glushkov: in these conditions, it is important to have a local partner with administrative resources.

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The partners do not comment on payback periods. Considering that in Russia R-Pharm specializes in licensed production and distribution of expensive drugs, the company is unlikely to change its model, Demidov believes. In this case, according to his estimates, the payback of the project will be 5-6 years.

Products from this plant are planned to be supplied to the markets of the Middle East and North Africa (MENA). Logistically, the Azerbaijani plant will be closer to this region, Demidov estimates.

The plant in Azerbaijan will be the fifth for R-Pharma. Now he has three factories in Russia and one in Germany. The company operates in the USA, Japan and India, according to the R-pharma website. R-pharma's turnover in 2015, according to its own data, exceeded 77 billion rubles.

The private Azerbaijani company Vita-A was created in 2015 to implement innovative high-tech projects, including in the fields of medicine and pharmaceuticals, the report says. Vedomosti could not find any mention of it.