October 15, 2014
By Mark Terry, BioSpace.com Breaking News Staff
Controversy has erupted over whether or not Switzerland-based Novartis is halting the construction of its new manufacturing facility in the St. Petersburg, Russia region, with Pharma Letter reporting Wednesday that the project could be halted for as much as a year and the company quickly refuting those claims.
The project, located in the Novoorlovskaya special economic zone, was to be completed in the third quarter of 2014, and was slotted to manufacture high-quality generics and new drugs for the Russian market. It has the capacity to produce 1.5 billion tablets annually. The project began in 2011 as a component of Novartis’s five-year $500 million investment plan.
A company spokesman for Novartis Russia cited “technical problems.” However, unnamed sources tied to the Russian Ministry of Industry and Trade have indicated that sanctions against the Russian Federation by the West over President Vladimir Putin’s policies in Ukraine are a likely factor.
So far, Novartis has sunk around $140 million in the plant. It did not comment of any planned additional investment.
But according to a FiercePharma story today, a Novartis spokeswoman in the United States said that the original Pharma Letter report was inaccurate.
“Novartis is not suspending construction of our manufacturing plant in St. Petersburg, Russia. While there have been technical changes to the project layout, we are on track to open the site in 2015. We are committed to meeting this goal and to improving healthcare in Russia. This ongoing partnership with Russia enables us to expand our commercial presence in a key emerging market.”
Novartis‘s Russian plan has been stymied by its similar production facility in Singapore. The company announced new construction of that facility in October 2012, located in Tuas, Singapore.
“This investment further strengthens our strategy to establish key strategic sites based on technological competencies,” said Novartis CEO Joseph Jiminez in a statement. “Singapore will be strengthened through a new state-of-the-art facility for biotechnology which is a growing segment of our business. We have chosen Singapore as strategic supply point as it offers a wide range of advantages due to its strong local biomedical presence and knowledge, skilled labor as well as proximity to growth markets in Asia.”
This is part of the company’s long-term strategy to develop a worldwide manufacturing network of technology centers of excellence. In 2011 Jiminez stated, “Novartis is making a strategic investment in Russia for long term growth.”
Although the company’s development in Russia is undoubtedly strategic, it may also be a response to Vladimir Putin’s earlier warnings to foreign drug companies that if they did not manufacture locally they would be hit with restrictions. In 2011 the Russian government announced plans to invest about $3.8 billion to expand the country’s manufacturing industry. This motivated a number of international pharmaceutical companies to expand their Russian operations, including Novo Nordisk , Sanofi-Aventis, GlaxoSmithKline , Teva Pharmaceuticals , Pfizer Inc. and Nycomed.
