Drug makers await funds, privatization
"We invest with a long-term perspective," Michal Rusiecki, vice president of Enterprise Investors, told a gathering of foreign and domestic pharmaceutical executives in Warsaw on Monday.
Rusiecki said Polfa Kutno would use the money to develop its sales and marketing activities and to invest in new technologies to comply with good manufacturing practice (GMP) standards by the end of 1997 as required by law.
Industry analysts and insiders say that while the investment is a step in the right direction for the pharmaceutical market, it is barely enough to buttress the country's potential crown jewels.
Poland's $1.5 billion a year pharmaceutical market is expected to double in the next few years. However, domestic producers may be left out in the cold if the present investment trend continues. So far, only $15 million in foreign investment has trickled into Polish drug firms, with publicly traded Polfa Kutno taking the lion's share.
"This is close to nothing," said Przemyslaw Szmyt, director of MeesPierson EurAmerica.
"I think there is a lot of potential which could be developed," he said, "if only the Polfas are interested and the government takes steps."
Polish state-owned drug firms, called Polfas, are definitely interested.
Small and large state-owned firms alike need capital to build marketing and sales and to invest in new technology to meet good manufacturing practice (GMP) standards as required by law by the end of 1997. The standards are the key to entering Western markets and staying afloat at home.
But domestic firms, waiting for the government's privatization plans, have been hesitant to initiate talks with potential foreign partners. On the other side, foreign investors have been spooked by the government's complicated registration policy and national drug reimbursement policy, which favors domestic producers.
"We are in a vicious circle," said J. David Sakura, managing director of MeesPierson Inc. in New York, who has done extensive research on the Polish drug industry.
"If I could see clarity in the law ... in the health insurance scheme ... if one could start to predict the future market potential, then we would look closely at the potential of Poland," said Johan Werner, director of Ciba-Geigy Poland.
Though Ciba-Geigy has 64 products on the Polish market, its involvement here remains minimal - the company has invested zl. 20 million ($8.16 million) here but continues to produce outside of Poland.
Ciba-Geigy struck a deal late last year with Jelfa in Jelenia Gora in western Poland. Under the agreement, Jelfa will package Ciba's Estraderm TTS hormone-replacement patches produced in Switzerland. The cooperation is more of a symbolic gesture, said Werner, who declined to reveal the size of the deal.
John Scanlon, a consultant to ICN Pharmaceuticals Inc. in Poland this week, said his Costa Mesa, California-based company was "very interested in Poland."
Scanlon said ICN executives have visited three Polish state-owned companies - in the past year alone they've had serious talks with the state concern in Krakow. So far, no results. "They haven't been sending us 'y'all come' letters either."
Scanlon, former U.S. ambassador to Yugoslavia, said ICN would take the same approach here as with its acquisitions in the former Yugoslavia and St. Petersburg - keep employees of the native factory, downsize by attrition, train managers and offer shares or cash to workers. ICN, founded five years ago, has annual sales around $460 million and has been rapidly expanding internationally. Currently, ICN has offices in nine countries.
Scanlon said that Polish pharmaceutical companies need long-term strategic investors, not owners such as Enterprise Investors whose shares "could be sold tomorrow."
Frances Cloud, an industry analyst with Nomura Research Institute in London, said the Polish government does not provide enough incentives for foreign firms to produce in Poland. "So you might as well import," she said. Meanwhile, Hungary's pharmaceutical sector is reaping the benefits of hard currency from big names such as Bristol-Myers Squibb, Sanofi and Servier.
Nomura noted that Hungarian firms have a long-standing expertise in manufacturing and research due to the country's position as COMECON's main medicine supplier. The Polish drug market is very fragmented, she noted, whereas the Hungarian pharmaceutical industry is dominated by half a dozen strong domestic players.
While Industry and Trade Minister Klemens Scierski has emphasized the need for "a more aggressive approach" to reforming the pharmaceutical sector, for the moment foreign drug firms will have to unravel the industry's four-layered roll of red tape. To enter the market they must meet requirements set by the ministries of Health, Social Security, Trade and Industry, and Privatization.
Szmyt of MeesPierson commented: "This sector is still waiting for its Balcerowicz."
Rusiecki said Polfa Kutno would use the money to develop its sales and marketing activities and to invest in new technologies to comply with good manufacturing practice (GMP) standards by the end of 1997 as required by law.
Industry analysts and insiders say that while the investment is a step in the right direction for the pharmaceutical market, it is barely enough to buttress the country's potential crown jewels.
Poland's $1.5 billion a year pharmaceutical market is expected to double in the next few years. However, domestic producers may be left out in the cold if the present investment trend continues. So far, only $15 million in foreign investment has trickled into Polish drug firms, with publicly traded Polfa Kutno taking the lion's share.
"This is close to nothing," said Przemyslaw Szmyt, director of MeesPierson EurAmerica.
"I think there is a lot of potential which could be developed," he said, "if only the Polfas are interested and the government takes steps."
Polish state-owned drug firms, called Polfas, are definitely interested.
Small and large state-owned firms alike need capital to build marketing and sales and to invest in new technology to meet good manufacturing practice (GMP) standards as required by law by the end of 1997. The standards are the key to entering Western markets and staying afloat at home.
But domestic firms, waiting for the government's privatization plans, have been hesitant to initiate talks with potential foreign partners. On the other side, foreign investors have been spooked by the government's complicated registration policy and national drug reimbursement policy, which favors domestic producers.
"We are in a vicious circle," said J. David Sakura, managing director of MeesPierson Inc. in New York, who has done extensive research on the Polish drug industry.
"If I could see clarity in the law ... in the health insurance scheme ... if one could start to predict the future market potential, then we would look closely at the potential of Poland," said Johan Werner, director of Ciba-Geigy Poland.
Though Ciba-Geigy has 64 products on the Polish market, its involvement here remains minimal - the company has invested zl. 20 million ($8.16 million) here but continues to produce outside of Poland.
Ciba-Geigy struck a deal late last year with Jelfa in Jelenia Gora in western Poland. Under the agreement, Jelfa will package Ciba's Estraderm TTS hormone-replacement patches produced in Switzerland. The cooperation is more of a symbolic gesture, said Werner, who declined to reveal the size of the deal.
John Scanlon, a consultant to ICN Pharmaceuticals Inc. in Poland this week, said his Costa Mesa, California-based company was "very interested in Poland."
Scanlon said ICN executives have visited three Polish state-owned companies - in the past year alone they've had serious talks with the state concern in Krakow. So far, no results. "They haven't been sending us 'y'all come' letters either."
Scanlon, former U.S. ambassador to Yugoslavia, said ICN would take the same approach here as with its acquisitions in the former Yugoslavia and St. Petersburg - keep employees of the native factory, downsize by attrition, train managers and offer shares or cash to workers. ICN, founded five years ago, has annual sales around $460 million and has been rapidly expanding internationally. Currently, ICN has offices in nine countries.
Scanlon said that Polish pharmaceutical companies need long-term strategic investors, not owners such as Enterprise Investors whose shares "could be sold tomorrow."
Frances Cloud, an industry analyst with Nomura Research Institute in London, said the Polish government does not provide enough incentives for foreign firms to produce in Poland. "So you might as well import," she said. Meanwhile, Hungary's pharmaceutical sector is reaping the benefits of hard currency from big names such as Bristol-Myers Squibb, Sanofi and Servier.
Nomura noted that Hungarian firms have a long-standing expertise in manufacturing and research due to the country's position as COMECON's main medicine supplier. The Polish drug market is very fragmented, she noted, whereas the Hungarian pharmaceutical industry is dominated by half a dozen strong domestic players.
While Industry and Trade Minister Klemens Scierski has emphasized the need for "a more aggressive approach" to reforming the pharmaceutical sector, for the moment foreign drug firms will have to unravel the industry's four-layered roll of red tape. To enter the market they must meet requirements set by the ministries of Health, Social Security, Trade and Industry, and Privatization.
Szmyt of MeesPierson commented: "This sector is still waiting for its Balcerowicz."
