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Over USD 1 billion worth of investments made in Ukraine's technopark: Why the interest?

24 October 2013 Kavita Rainova

As an analyst covering Ukraine on a daily basis I find most developments in the country focused on low-tech technologies in healthcare - such as boosting access to cheap, mainly domestically-produced generics under Ukraine's fledgling reimbursement system. As such, it is a nice surprise to see an initiative targeting innovative technologies in the country.

Earlier this month, the details of a biomedical innovation and technology centre BITEC, to be created in Ukraine's Odessa region, began to emerge. The project will encompass the creation of several research centres and manufacturing facilities, with reported investments amounting to UAH 10 billion (USD 1.2 billion). It follows a strategy introduced in several CIS countries like Russia and Belarus of creating "technoparks" or "technology clusters" in order to boost pharmaceutical production, support innovation, and attract foreign investments in the local industry. Inline with technoparks in Russia such as Yaroslavl and Ural clusters, and in Belarus - biotech park BelBiograd - the project in Ukraine has attracted interest from several foreign manufacturers.

Investments in BITEC
The project was created at the request of Ukrainian President Viktor Yanukovichto. Its aim is to provide access to medical care, based on new and innovative technologies, as well as improve the quality of medical education and national competitiveness. BITEC was designed to be formed in two parts: an industrial side in the city of Teplodar in the Odessa region, and a scientific research side in the city of Odessa. Some of the reported investments made by international multinationals in both research centres and manufacturing facilities include:

  • Facility for the manufacture of innovative insulin to be built in cooperation with Danish company Novo Nordisk, with investments to this project amounting to EUR 155 million (USD 209.6 million)
  • Siemens (Germany) and Johnson & Johnson Medical Devices (United States) intend to create a facility for manufacturing medical equipment. Furthermore the companies will also be creating a centre for medical diagnostics with focus on diagnostic and laboratory tests without restrictions in areas such as cardiology, cardiovascular surgery, neurosurgery, general surgery, traumatology and orthopaedics, sports medicine, paediatrics, obstetrics, and gynaecology. The investments into the centre are to amount to EUR 131 million.
  • Facility for the fractionation of blood plasma, which is expected to manufacture preparations such as albumin, normal immunoglobulin for intravenous administration of human blood coagulation factor VIII, and human blood clotting factor IX to be build in cooperation with Germany company Glatt. Investments in the project amount to EUR 175 million.
  • Facility for the production of drugs to be built in partnership with US firm Pfizer with investments amounting to EUR 137 million.

Why would foreign companies be interested in investing in Ukraine?
While the Ukrainian government is looking to spark innovation and increase production, foreign manufacturing investment in the Ukraine points to the growing attractiveness of the market. The Ukrainian pharmaceutical market is the second biggest in the CIS, having grown 16% year on year to USD 3 billion in 2011. Total healthcare spending is expected to increase by 13.9% per year on average until 2015 (Source: Deloitte).

The rising healthcare spending suggests expanding access and demand for drugs. Additionally, the government is in process of implementing programmes for improving the healthcare system, and increasing the population's access to medications and medical care. For example, a pricing and reimbursement scheme was introduced on certain diabetes treatments intended to improve access to affordable medications to the country's 1.2 million population with diabetes. Apart from market growth and programmes geared specifically to healthcare, the implementation of regulations, such as Good Manufacturing Practice (GMP) standards compliance, and data exclusivity protection, have been positive for foreign multinationals.

Thus, although the Ukrainian government has been increasingly supporting domestic manufacturers, the partnerships with, and cooperation of, foreign manufacturers in BITEC could help the companies strengthen their position in Ukraine and tap into its expanding pharmaceutical market.

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