PRESS - RELEASE
DIOD (RUSSIA) ESTABLISHES JOINT VENTURE WITH AUROBINDO PHARMA (INDIA) TO MANUFACTURE AND MARKET GENERIC DRUGS IN RUSSIA
Moscow, Hyderabad - 7th September 2011. OJSC DIOD, (MICEX, RTS Board: DIOD) a Russian manufacturer of ecological healthcare equipment and nutrition supplements through its investment holding subsidiary (hereinafter referred to as 'Diod') and Aurobindo Pharma Limited (BSE: AUROBINDOP) through its investment holding subsidiary (hereinafter referred to as 'Aurobindo'), announce establishment of a joint venture in Russia on a parity basis (50%:50%). The name of the Joint Venture is Aurospharma Company (hereinafter referred to as the JV). It is established to manufacture and sell the pharmaceuticals in the markets of Russia, Belarus and Kazakhstan.
As a part of this cooperation, the JV intends to construct a state of the art plant to manufacture Non Penicillin and Non Cephalosporin Rx generics and other drugs that are categorized as Over The Counter (OTC) products in Russia. To harmonize interests of the JV partners in the Russian market environment, it has been contemplated to transfer 100% interest in the CJSC Olifen (engaged in production of pharmaceutical substances) being held by DIOD to the JV company subject to due diligence. In addition, the JV shall source Penicillins, Cephalosporins and few other therapy products manufactured by Aurobindo Pharma Ltd, India to sell in the markets of Russia, Belarus and Kazakhstan.
The plant to be built in Russia will focus on production of socially significant medicinal drugs. This project fully complies with the priorities of the Strategy for Development of the Russian Pharmaceutical Industry for the Period through 2020 (Pharma-2020 Strategy) approved by the Russian Ministry of Industry and Trade, since it indeed helps make the Russian public healthcare less dependent on import of finished dosage forms. Once implemented, the project would bring about substantial savings for the program of government procurement of socially significant medicinal drugs and reduction of applicable budgetary expenses. Consequently, this should make modern pharmaceuticals more affordable and accessible to the public at large in the countries members of the Customs Union. A number of Russian public organizations also support the project. It is important to realize that the project will help the government to save considerable budgetary funds since instead of buying expensive original drugs it could buy generics, which are no less efficient, but are much cheaper than the original drugs. More Russian citizens will get access to therapy every year.
The plant meeting the GMP standards (using AUROBINDO's expertise), will be constructed in the Podolsk District (Moscow region). It is expected that the construction will be completed in 2013 and the plant will be launched in the first quarter of 2014.
Vladimir Tikhonov, Diod CEO, commented: 'Diod has made a journey towards this partnership, lasting for many years. We believe that the establishment of the JV should allow us to become an important player at the Russian pharmaceutical market within the target period. Diod intends to enrich this project with its unique long-term experience in selling medicinal drugs and nutrition supplements in the markets of Russia, Belarus and Kazakhstan and support it with its own distribution network resources and streamlined channels of interfacing with medical organizations.
While commenting on the arrangements to establish the JV, Mr. Vishnu Sriram, Associate Vice President of Aurobindo, said, 'Establishment of a JV with the Russian Diod company perfectly weds with our international expansion strategy, in accordance with which we establish partnership relations with competent local companies in the target countries. The JV format gives us an opportunity to localize our production in Russia. Using the Russian partner's marketing vision, we will be able to enter the growing and challenging Russian market with greater confidence and expedite our presence in the market. Aurobindo will enrich the JV with its successful international
experience in manufacturing medicinal substances and drugs - the so-called generics*.
Nikolai Demidov, General Director, Pharmexpert Medical Research Center, added in this context:
'Now, many Russian companies face a very challenging task of choosing the right path for their development. The federal government has defined clearly its plans to facilitate and stimulate domestic production of medicinal drugs, emphasizing, in particular, the need for innovations. The strategy for development of the industry through the year 2010 has been developed and a relevant federal target-oriented program has been approved, making provisions for generous budget spending, and a list of strategically important drugs has been approved, etc.
A window of opportunity is now wide open for Russian companies and it is highly important for them not to miss this chance for making great strides towards the goal of development.
The partners of Diod have the advantage of a vast experience in manufacturing medicinal drugs and of a broad product range - many their products will eagerly find enthusiastic buyers in Russia and countries constituting the common customs space (Belarus and Kazakhstan). The aggregate market in Russia for the types of medicinal drugs that the participating companies intend to manufacture and market jointly, is about US$1.9 billion as of the end of 2010, and sales have been growing at 15% annually on the average. In this country, very few pharmaceutical companies are in a position to say proudly that their target market is so voluminous. Provided the product range of a plant is made up in the right way and an effective marketing and promotion system is developed and put in place, they may easily be looking at a 10-15% market share in terms of annual sales'.
*A generic drug is a drug with the proven pharmaceutical, biological and therapeutic equivalence to the original drug, but without a patent protection. A generic drug may differ from the original drug in composition of exci-pients. A generic drug appears on the market after expiration of the term of patent protection of the original drug.
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For further information, please contact:
Yulia Martyshova
IR manager OJSC DIOD
Tel: +7 499 235 - 21 - 51
E-mail: investor@diod.ru
Bloomberg (MICEX (Main Market): DIOD RX
Reuters (MICEX): DIOD.MM
For additional information, please visit: http://www.diod.ru/pages/news
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ABOUT THE COMPANIES
OJSC DIOD: (www.diod.ru) is a leading Russian healthcare goods producer. The company manufactures such well-known nutrition supplement brands as Capilar, Viardo, Iod-Active, Phase 2, etc., holding 6% of the Russian market (source: DSM Group, 2009). Diod also manufactures healthcare equipment, healthcare cosmetics (3.4% share of the Russian market), pharmaceuticals (Orvirem, Hypoxen),
and has its own retail chain 'Mir ekologii'. The company is the world's largest producer of dihydroquercetine (taxifolin) (source: Cherkassy NIITEKhIM, 2009).
At the end of 2010 Diod reported audited consolidated revenues of RU1.5 bln, and EBITDA of RU0.2 bln. According to IFRS-compliant statements, the company's net income in 2010 amounted to RU131 million. In June 2010, the Company placed 10% of its shares in the Sector of Innovations and Investments on MICEX.
Measured by results of this IPO, Diod's capitalization amounted to RU3.0 bln. CJSC FINAM acted as the organizer of the placement and the market-maker of these shares.
Aurobindo Pharma Limited: (www.aurobindo.com), headquartered at Hyderabad, India, manufactures generic pharmaceuticals and active pharmaceutical ingredients. The company's manufacturing facilities are approved by several leading regulatory agencies like USFDA, UKMHRA, WHO, Health Canada, MCC South Africa, TGA Australia, ANVISA Brazil. The company's robust product portfolio is spread over 6 major therapeutic/product areas encompassing Antibiotics, Anti-Retrovirals, CVS, CNS, Gastroenterologicals, and Anti-Allergics, supported by an outstanding R&D set-up. The Company is marketing these products globally, in over 125 countries.
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