Drug Market $560M in Q1

Russia's pharmaceutical market grew to $560 million in the first quarter, up 19 percent over the same period last year, according to the latest figures from industry monitor Farmexpert.

Compared to the last quarter of 2000, however, the market actually shrank 17.5 percent — a trend that occurs every year, said Farmexpert analyst Nikolai Demidov. "The end of the year is always more successful," he said.

The new data shows domestic producers losing market share to foreign competitors, which now claim 62 percent of total sales.

Russia's Top 10 Drug Producers

Q1 2001

Q1 2000

Producer

Q1, 2001, mln rubles

% of Q1, 2000

1

3

Sintez

621.7

147.2

2

6

Bryntsalov A

440

167.4

3

2

Moskhimfarmpreparaty N. A. Semashko

427.5

94.3

4

4

Biosintez

369.3

101.3

5

15

Krasfarma

366.7

261.5

6

1

Akrikhin

337.9

66.6

7

5

Biokhimik

314.5

105.8

8

12

Dalkhimfarm

244.5

139.9

9

9

Nizhfarm

236.6

112.5

10

10

ISN Oktyabr

189.2

95.2

Source: Farmexpert

In January, drugs worth $93 million were imported into Russia, 37 percent less than in December, according to Farmexpert. Demidov said this figure was an anomaly as holiday-packed January has fewer working days. From February to March, the situation corrected itself and import volume totaled $346 million for the first quarter, up 34 percent over the first quarter of 2000, he said.

The lion's share of the imports, more than 84 percent, came from Europe, with the Danish company Novo Nordisk more than doubling its sales volume and Belgium's Janssen-Cilag increasing its business here by 20 times, according to Farmexpert.

The share of West European drugs increased by 4.5 percent, while the volume of deliveries from East European producers fell by 4 percent. For example, the Hungarian company Gedeon Richter decreased its exports to Russia by some 10 percent, dropping the company from first to seventh in import volumes. Imports from Ukraine grew by 60 percent and imports from Belarus by 37 percent.

Imports from the United States fell by 43 percent. Only two American companies, Eli Lilly and Pfizer, increased their shipments, by 2.8 times and 1.5 times, respectively.

Russian production in the first quarter grew just 3 percent to $230 million, Farmexpert data show. The industry produced 19 percent fewer products in the first quarter than in last year's fourth quarter. "Even the rise of the numbers in March was so insignificant that it would be wrong to speak about the stepping up of production," said Demidov.

Krasfarm led the way for domestic producers, increasing its production 260 percent. The company attributed its success to a change in management structure and accounting after joining the Otechestvenniye Lekarstva group. The other enterprises in that group, Novosibkhimfarm and the Shchelkovsky vitamin factory, also posted production gains.

Not all of the production holdings demonstrated successful results, however. Among the Farmtek enterprises, only Sintez was able to increase its volume of production, by 47 percent. Biosintez and Biokhimik held steady.

The biggest surprise on the market, according to Farmexpert, was Akrikhin, which cut its production by a third in the first quarter of 2001 to drop to sixth place among domestic producers after having been No. 1 for all of 2000. Akrikhin marketing director Alexander Tyulyayev dismissed allegations that the decline was connected to a change of directors.

At the start of the year, wholesalers studied the traditional decline in market activity. However, this time, to the seasonal factors were added problems with customs. Toward the end of the quarter, all of the misunderstandings were resolved, but the delays of import shipments caused stagnation within the market. Nevertheless, the volume of imports of Russian distributors in the top 100 rose on average by 60 percent in comparison with the first quarter of 2000.

Protek and SIA International remain the leaders in the wholesale segment. The decline in their shipments was minimal. For example, in February, SIA was able to overcome its main competitor. The results of the first quarter show Protek is still leading, but not as confidently as it had in the past.

Two other competing companies, Invacorp Farms and Shrei Corp., changed their positions. In the first quarter, Shrei supplied 1.7 times more drugs than Invacorp. Those numbers make it possible to speak about changes in the structure of the top companies. "In general, the distributor sector anticipates major changes because there is a process of concentration taking place in the market," said Demidov.

Unifarm, the largest importer of Vitrum vitamins, joined the list of top 50 importers. Foreign producers of vitamins became more active. Now, 15 percent of the advertising budget of the 50 largest companies is spent on ads for vitamins. The company Irwin Naturals holds first place in the ratings for spending on advertising.