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AstraZeneca plc to invest upwards of $150 million in the construction of a Russian plant

AstraZeneca plc is to invest upwards of $150 million in the construction of a Russian plant. The move is aimed at joining rivals in the pharma space looking to sidestep tougher rules on imported medicines as Russia drives to support its domestic industry.

Under its plans, AstraZeneca will set up the plant in the Kaluga region southwest of Moscow, with construction work set to begin in April this year and the plant is scheduled to launch the production of cancer, heart, and other drugs in the spring of 2013.

According to Reuters, the underserved Russian market is set to outpace developed peers as its middle class grows and the government boosts spending on public health, while also tightening legislation to rein in prices and raise the share of locally produced drugs.

The Russian government has put the pharmaceutical industry as one of the key components to his plans to diversify the economy away from oil and gas, offering incentives for local production. A number of pharmaceutical firms have forayed into Russia, keen to take advantage of the domestic growing market. These investments may significantly increase at the next stages of the companies’ development in Russia.

A recent report from Frost & Sullivan noted that, with total revenues of $15.3 billion in 2009, the Russian pharmaceutical market is one of the largest in the world. The market is anticipated to remain on a path of dynamic growth from 2010 to 2016 mainly due to multiple initiatives of the Russian Government. It estimates the Russian pharmaceutical market will reach a value of $37.15 billion in 2016.

The ever growing interest of majors in the Russian pharmaceutical market may not only be linked to its great prospects, but also the efforts by the Russian government in recent years to attract investments in the domestic pharmaceutical industry. Among these incentives is the introduction of 15% mark in state procurement of drugs, which were produced in Russia and certain tax benefits.

In addition, the current low level of consolidation of the Russian pharmaceutical market, where the top five companies account for only 21% of total sales in value terms could be considered as another factor for Russia’s foreign expansion.

AstraZeneca plc is a global pharmaceutical and biologics company headquartered in London, United Kingdom. It is the world's seventh-largest pharmaceutical company measured by revenues and has operations in over 100 countries. It has a portfolio of products for major disease areas including cancer, cardiovascular, gastrointestinal, infection, neuroscience, respiratory and inflammation.

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