Danish Pharma Novo Nordisk Opening Plant in Russia

Posted: January 27, 2015 in Econ 101, Free Trade, Sanctions on Russia Meaningless

SOURCE: http://www.bloomberg.com/news/2015-01-23/novo-nordisk-plans-to-move-forward-with-investments-in-russia.html

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Novo Nordisk Plans to Move Forward With Investments in Russia

Novo Nordisk A/S (NOVOB), the world’s biggest insulin maker, is forging ahead with investments in Russia even after the ruble weakened amid economic sanctions tied to the nation’s conflict with Ukraine.

Novo is building a plant in Russia and considers its investment there necessary “in the long haul,” Jakob Riis, the Bagsvaerd, Denmark-based company’s head of marketing, medical affairs and stakeholder engagement, said in an interview yesterday.

“Russia is not a mess,” said Riis, speaking in Davos, Switzerland, where he’s attending the World Economic Forum’s annual meeting for the first time. “We want to continue to run good business” in the country, and the new production facility will open soon, he said, without being more specific.

Drugmakers are among businesses with Russian operations that have been stung after sanctions followed the country’s annexation of the Crimea region of Ukraine in March. The ruble has plunged more than 40 percent against the dollar since then. Roche Holding AG Chairman Christoph Franz said in a separate interview in Davos that Russia is now a “less profitable” business for the Swiss drugmaker.

Novo is planning for the long term as it charts a course in Russia and other emerging markets, Riis said. There were more than 6.7 million cases of diabetes in Russia last year, with the number of deaths from the disease among the adult population reaching 123,400, according to estimates by the International Diabetes Federation.

In recent days, Russia’s political isolation has been amplified by escalating battles between Ukrainian and Russian troops since an effort to restart peace talks collapsed.

“My personal view is that this will somehow, at some point, quiet down and somehow the economy is going to develop again,” Riis said. “By sheer demographics and resources, it’s going to be an interesting market.”

The sustainability of costs, as well as inefficiencies in health systems in many countries, were the talk of health experts attending the Davos meeting, Riis also said. Pricing pressures in the U.S. are a worry for many drugmakers, he said.

“If you are going to sell a product and sell a lot of it, there’s an expectation that you will do rebates in return,” he said. “That is tough.”

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