An Interview of Vnesheconombank’s Innovations and High Technologies Department Director to the Program “Development Projects” (TV Channel Russia-24)

- Oleg Yurjevich would you specify the role of the state, development institutions including that of Vnesheconombank in encouraging the development of the pharmaceutical sector?

-We have been cooperating with the pharmaceutical sector for a short period of time; this is a new sector for us. It was included in the Bank’s Memorandum on Financial policies only two years ago but nevertheless we have been closely cooperating on a number of projects. In my opinion, VEB’s role is to fund those projects which ordinary commercial banks are not able to fund because of rather long payback periods and the need to introduce new technologies etc. I’d like to stress that we are learning to take intellectual property as collateral, that is, intellectual and innovative content of projects. This is quite a new situation for Russia’s banking sector. And I’d like to stress it once more that to my mind, development institutions’ role is to fund interesting high-technology innovative projects with long payback periods which require low interest rates. Moreover, we participate in preparing technological platforms jointly with the Economic Development Ministry and we are also involved in developing legal framework.

- What projects is Vnesheconombank implementing in innovative biotechnological and pharmaceutical sectors, how much money is committed for them, what’s VEB’s specific approach to funding projects in these sectors?

- I’d like to highlight three main projects we are funding properly now.

The first of them is the Fort Project in the Ryazan region. It provides for constructing Europe’s largest integrated pharmaceutical plant to manufacture a number of medical products including innovative ones and above all flu and hepatitis vaccines developed in Russia. This project is being implemented jointly with State Corporation Rostechnologies under the Memorandum on Cooperation that we signed in 2011. The plant is scheduled to be launched in 2013. The project’s value is more than 4 billion rubles.

We are implementing the second project together with Sphera-Farm Company. This is a project on manufacturing dialysis solutions under GMP standards in the Kaluga region. As distinct from the past practice of mixing all dialysis solutions in pharmacies, with introduction of new requirements and standards, this practice is forbidden now and the demand for these solutions is gigantic: factually almost all medical interventions are associated with the use of infusion solutions.

The third project. We agreed with Biocad Company on constructing the second stage of the pharmaceutical plant to manufacture cancer drugs in the Neudorf special economic zone outside Saint Petersburg.

In general, I estimate the sector’s requirements at tens of billions of rubles. We have to go a long way as the process is not limited to pharmaceutics alone: we need to produce medical equipment (from the simplest to the most sophisticated devices), prosthetic equipment. We have promising projects on producing stents for heart operations etc. I have already mentioned that in implementing such projects a development bank’s role is especially important as it can provide long-term inexpensive credit resources and does not focus on commercial efficiency. Undoubtedly, under our Memorandum on Financial Policies all projects supported by VEB are to be implemented on a break-even basis and we do not seek to earn high interest, our activity is above all aimed at developing the sector.

I’d like to note that VEB’s Development Strategy till the Year 2015 provides for 20% of our loan portfolio to account for investment projects related to innovation and high-technology sectors. We have a high stake in implementing this sort of projects because besides their commercial component they result in introducing Russian technologies, training young specialists. It’s very important for us that we are in a position to provide pretty long-term and inexpensive credit resources to encourage innovation projects. So, we are particularly interested that project initiators submit their applications for such credit resources to us.

- When do you think we’ll be able to reach a pretty sufficient level of import substitution in the Russian pharmaceutical sector and a significant level of innovative medical products development?

- The process is already taking place although not so fast as we would like it to but we can see excellent prospects opening. We shouldn’t forget that investment cycle in pharmaceutics is rather long: a preparation stage of any medical product alone takes at least a year and a funding stage takes at least two-three years. And I think that somewhere in 2016-17 we could reach a sufficient level of import substitution and the country will be able to provide itself with medications.

And our objective is not only to saturate the Russian market but also enable our partners to tap foreign markets to build plants, export technologies to other countries. And these prospects are opening because our developments are absolutely competitive and are rated highly on the market. And we hope that with the assistance of Vnesheconombank’s subsidiary, namely, the Export Insurance Agency of Russia (EXIAR), we’ll be able to implement a whole number of projects. It’s too early to name them but this is a very promising and interesting line of activity for us.

- What results do you expect from implementing the Biocad project, are there any preliminary estimates, to what extent will Biocad medical products be cheaper in comparison with their foreign analogues?

- The main result is that innovative medical products scheduled to be manufactured by Biocad will be a lot cheaper than imported ones. Generally speaking, treatment of serious diseases like cancer is very expensive. Those who experienced this know that one injection might cost several thousand euros. The situation is exacerbated if a country relies entirely on imports: by monopolizing the market sellers is in a position to impose their price terms that are prohibitively high for Russian consumers. Moreover, as budgetary funds allocated for purchasing vitally important medications are limited there arises a need to introduce quotas for them. It goes without saying that such a situation is unacceptable. We’d like all people to have enough medications at prices affordable for them. Therefore, we seek to implement this sort of projects in pharmaceutics. And in examining investment projects we pay particular attention to their financial component. Judging by a financial model that we have developed jointly with Biocad Company with regard to a number of vitally important medications, prices will be affordable for people to treat diseases they unfortunately suffer from. On average, these medicines will be 2-3 times cheaper than foreign ones and their quality will be no worse and often even better than that of their foreign analogues.