Novartis Will Invest $500 Million In Russia

Novartis has signed an agreement with St. Petersburg, Russia, to build a pharmaceutical manufacturing facility in the city as part of a $500 million investment in infrastructure, health care initiatives, and R&D in Russia over the next five years.

Novartis says construction will begin next year on a facility to which it will transfer technology for the manufacture of generic and innovative pharmaceuticals. "This collaboration shows our commitment to contributing to the ambitious health care goals of the Russian government," says Novartis CEO Joseph Jimenez.

In addition to building the plant, Novartis says it will invest in research collaborations that may include out-licensing of Novartis compounds to qualifying Russian companies and in-licensing compounds from Russian scientists and universities. Novartis has also committed to doubling its investment in drug development and clinical trials in Russia.

The announcement follows a pledge last week by Russian Prime Minister Vladimir Putin of some $4 billion in federal funding for pharmaceutical industry development over the next 10 years. The government has set a goal for local industry to produce 90% of Russia's "essential medicines"—about half of total pharmaceutical sales—by 2020.

According to Michael Kleinrock, director of market insights at the consulting firm IMS Health, Russia is a "high potential" emerging market for multinational drug companies as it follows the lead of China and India in developing its domestic drug industry. "They understand there is a linkage between the science and the benefit for health care," Kleinrock says.

Novartis is already active in Russia. It is working with the Federal Almazov Heart, Blood & Endocrinology Centre in St. Petersburg to establish a biobank for clinical research. This year, the company entered a partnership with the Russian region of Novosibirsk to work on managing pulmonary disease and asthma, and with the region of Yaroslavl to develop a pilot program for disease management and health care professional training.

Novartis is the only pharmaceutical industry member of the Foreign Investment Advisory council, a task force of international business representatives and Russian government officials, including Putin.