Foreign Investment Commission Approves Plant, Oil and Gold Mine Deals

Apr. 14 – Prime Minister Vladimir Putin and the government’s foreign investment commission on Tuesday approved a deal to sell a private insulin plant to Europe’s biggest drug maker, France-based Sanofi-Aventis.

The plant was bought in Oct 2009 from Bioton Vostok in Oryol region of Russian Federation which lies in 382 kilometers to the south of Moscow, in the European part of Russia.

Putin singled out the planned French investment as particularly noteworthy. “Among these, I want to point out one project that is not big but is significant, in my view,” he said, referring to Sanofi’s intention to buy 74 percent of the Bioton Vostok plant in Oryol.

Sanofi, the world’s third-largest drug maker by sales, wants to produce insulin-filled syringes at the facility, Putin said. The remaining shares will still be owned by Russian businessmen. According to company data its revenue last year was 19.5 billion roubles.
Federal Anti-Monopoly Service chief Igor Artemyev, who is in charge of previewing the investment plans, said the French firm would invest hundreds of millions of euros and provide state-of-the-art technology. Officials did not give any other figures about the deal.

The project, Putin said, is especially welcome in the light of Russia’s stated efforts to become more self-sufficient in terms of medicine supply.

Russian pharmaceutical industry is a fragmented industry with no clear-cut dominance of any player. The market is replete with large number of small players. Top 10 drug manufacturers collectively account for about 40 percent of the market value.
According to iQuestSolution survey “Pharmaceutical Industry in Russian Federation,” released in April 2010, Sanofi-Aventis holds the second position in the Russian pharmaceutical market with 5.6 percent after the Switzerland based leader Novartis, whose share is 6.6 percent.

The size of the Russian pharmaceutical market is estimated at about US$22 billion as of December 2009. The country has a per capita pharmaceutical spending of about US$130.

Domestic pharmaceutical manufacturers in Russia largely focus on low-cost drugs, while the foreign players dominate the expensive drugs segment. This is evident from the fact that locally produced drugs in the country account for about 22 percent of the market value and about 70 percent of the market volume.

Russian pharmaceutical overall market size has remarkably grown from US$10.9 billion in 2006 to US$22 billions in 2009. The market is expected to grow at a compound annual growth rate of about 14 percent for next three years.

The commission for foreign investment in strategic industries, chaired by Putin, also backed Gunvor’s purchase of a stake in an offshore Caspian Sea oil field and several other transactions.

Gunvor Cyprus Holding Limited, a subsidiary of the Swiss oil trader Gunvor, co-owned by Putin’s acquaintance Gennady Timchenko, secured a green light to buy 30 percent in a Swedish oil-producing unit PetroResurs, which is developing the Lagansky field off the Caspian Sea coast.

Swedish oil firm Lundin Petroleum agreed to sell the stake to Gunvor in September. The book value of the field, next to LUKoil’s major Korchagina deposit is US$850 million and potential reserves are more than 800 million barrels.

Lundin is going to invest US$540 million in the field this year, 4 percent more than last year. The money will pay for the construction of a drilling rig that is scheduled to start operation in 2011.

In another deal that got the go-ahead, Tatneft Oil, a Swiss-registered subsidiary of the country’s No. six oil producer Tatneft, is buying an unspecified number of shares in Bank Zenit. Tatneft already holds 24.6 percent in the bank.

In addition, the oil company owns 48.8 percent of the International Petrochemical Growth Fund, which has a 41.92 percent stake in the bank. A spokesman for Zenit, the country’s 27th-largest bank by assets, did not respond to an e-mail request to comment on Tuesday evening.

Billionaires Mikhail Prokhorov and Suleiman Kerimov also got approval to consolidate their assets in the gold miner Polyus Gold, Artemyev said. Their Kazakhstan-based company, KazakhGold Group, registered on the island Jersey, will buy a number of Polyus-related units, he said.

In an opening speech at the commission meeting, Putin ordered Artemyev to submit proposals to streamline foreign investment legislation as soon as possible. Artemyev told media after the session that his agency would probably be ready to report in two weeks.