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. Last Updated: 07/27/2016

ICN Set to Invest $13M In Russia

Of the $525 million ICN Pharmaceuticals raised in July through a convertible notes offering, a "small" portion is earmarked for Russian operations, said chief executive officer Milan Panic.

Panic -- whose visit to Moscow on Friday spurred ICN to re-announce the offering that let the U.S. company redeem high-interest bonds -- said company shareholders are not as keen to invest in Russia as he.

"I believe Russia is an excellent investment place, but not too many other people think that," Panic said in a telephone interview.

He said the greatest dilemma facing ICN -- which owns five factories, 11 distributors and dozens of pharmacies throughout the country -- is that distributors are increasingly favoring costly foreign brands at the expense of cheaper Russia-produced medicines.

Panic, former prime minister of Yugoslavia who lost the 1992 election to Slobodan Milosevic, said his company is still on the road to recovery from the 1998 ruble devaluation that crippled operations here by slicing sales.

"The biggest problem is that we are unfairly competing with imports," he said. "We are having severe problems competing with foreign brands because our products are lower in price, and distributors would rather sell $5 products than $0.50 [products]."

ICN, which in eight years in Russia has invested some $200 million, has more recently been cutting production, raising prices and expanding into retail, particularly with its Moscow pharmacies that compete with the 36.6 chain.

Investment this year will amount to around $13 million, depending on a planned $3.5 million purchase of a chain of 40 kiosks located in Moscow metro stations, said John Ortega, head of the Russia office.

The company also wants to step up exports, particularly to CIS countries, from 3 percent of production this year to between 15 percent and 20 percent in 2002. Panic said sales were around $100 million last year and should be up 5 percent to 10 percent this year.

Overall, the retail pharmaceutical market grew 7.2 percent year on year in the first half of 2001 to $958 million, according to the Association of International Pharmaceutical Manufacturers.

Foreign companies make up 67 percent of the pharmaceutical market, compared with 40 percent two years ago after the crisis had pushed import prices up, ICN said. But both foreign and domestic manufacturers are preparing for a planned value-added tax on pharmaceutical drugs starting in early 2002.

Panic said he sees growth potential in Russia in the long-term, particularly "if God is on Russia's side with the price of oil."

"I've been accused of believing too much in Russia," he said.