Innovation injection
Polish pharmaceutical firms are finding that innovation is the key to unlocking the domestic market, and while the international giants of the industry are losing market share, homegrown firms are going from strength to strength and are taking on the Goliaths of the medicine industry on the global stage.
Eight months ago Bioton, an antibiotics and insulin producer, debuted on the Warsaw Stock Exchange (WSE), with 16 million of its shares changing hands for zł.2.75 each. Last month its share price peaked at zł.12.30 and now the company is preparing to join the WIG20, the cream of the country's company crop.
However, Bioton is not the only success story on the Polish pharmaceutical market. Adamed and Polpharma are winning their own battles, much to the chagrin of international concerns such as Eli Lilly, Sanofi Aventis or Novo Nordisk. What's more, the Polish producers are not content to play just in their own backyard and are now going global.
The key to success in pharmaceuticals lies in finding a new, unpatented technology of a popular drug and being able to sell a product of equal quality for a considerably lower price. Bioton managed to break the monopoly of international concerns in the production of human insulin, which is sold by Novo Nordisk and Eli Lilly, among others. Adamed came up with a new way of obtaining amlodypine - a hypertension treatment sold exclusively by the international giant Pfizer. The company also earned the ire of American giant Eli Lilly when it found a new recipe for olanzapine, an anti-schizophrenia drug. The American giant subsequently sued the Polish producer for a breach of patent law. Eli Lilly lost the case while Adamed joined the top 10 pharmaceutical companies in Poland. Eli Lilly has subsequently appealed the decision. Recently, Pfizer took a similar blow when it turned out that Polpharma had succeeded in patenting an active substance used in the production of Viagra.
Innovations boom
Instead of waiting for foreign companies' patents to expire and contenting themselves with the production of generic drugs, Polish companies started to invest in their own research and it quickly paid off.
"Last year we spent $17 [zł.58] million on R&D and in 2005 we expect the figure to reach $25 [zł.85] million. We sell mainly generic drugs but also provide active substances for other companies," said Krzysztof Jakubiak, a spokesperson for Polpharma.
International pharmaceutical concerns can't ignore the strong new competition, and in 2004 all foreign players operating on the Polish pharmaceutical market registered a decline in sales. Adamed, Bioton and Polpharma, on the other hand, continued to push forward. Polpharma even managed to make it into the top-three producers on the Polish pharmaceutical market, which is worth some zł.14 billion according to IMS Health, following hot on the heels of giants such as GlaxoSmithKline and SanofiAventis.
Invading the market
Magdalena Jakubowska, a corporate-affairs associate in Eli Lilly, admits that the dynamic growth of the Polish pharmaceutical market influenced the American concern's position.
"In September this year Bioton's share of the national insulin market increased to 18.2 percent as compared to just eight percent at the end of 2004. This means we are constantly strengthening our position," said Jerzy Barbachowski, Bioton's marketing manager.
The appearance of the cheaper insulin sold under the trade name Gensulin was good news for diabetic customers and the Polish budget. Insulin is included on the list of refunded drugs, which means patients pay only for a part of the drug's value and the difference is covered by the state. For a pharmaceutical company, having its drugs added to the list means a constant inflow of money so it's little wonder that they defend their positions savagely.
International expansion
Bioton's Q3 2005 sales revenues reached zł.34.3 million with its net income amounting to zł.4.2 million. Gensulin has already been registered in Egypt, India, Russia, Belarus, Ukraine, Kyrgyzstan, Uzbekistan and Vietnam. Registration procedures are underway in several other countries, including China and Indonesia, and in June this year Bioton started the construction of a new production plant in Russia, which is the fifth-largest insulin market worldwide. Bioton SA also recently acquired a 44.78-percent stake in Singapore-based Sci Gen and through this firm it sells Gensulin in India, Vietnam, Pakistan, and the Philippines.
"We're also preparing a new investment in Macierzyce. It's going to be funded with EU subsidies for competitiveness enhancement and we've already discussed our plans with the Ministry for Economic Affairs," said Bioton's CEO, Adam Wilczęga.
Adamed is also aiming at foreign markets. Amlozek, its hypertension drug, is exported to many European countries as well as to Saudi Arabia. Apart from finding new recipes for already existing drugs, the company conducts research on innovative pharmaceuticals. In March this year, Adamed established a subsidiary in the US, where scientists will test the first anti-cancer drug created by Poles.
Privatization clash
At the moment, however, Adamed's attention is focused on the domestic market as the company has raised questions over the privatization tender for Jelfa. The state-owned pharmaceutical producer is worth zł.600 million and 47 percent of the firm's shares are up for grabs. Lithuanian firm Sanitec seems to be leading the pack, but two other firms, Enterprise Investors and Adamed, are disputing the tender process.
"Adamed's lawyers and counselors had a close look at the privatization procedures and we think it was not transparent enough and the rules kept changing. As a result we turned to the Industrial Development Agency (ARP) with a motion to start the procedure again with clear rules," said Maciej Adamkiewicz, the president of Adamed.
Founding fathers
The pharmaceutical sector is one of the fastest developing industries in Poland. From January to September 2005 Poles spent almost zł.13 million on pills and medicine. But the success of Polish firms is anything but accidental. The niche was first spotted by two famous entrepreneurs who regularly feature high on the list of the richest Poles. Ryszard Krauze, the owner of IT firm Prokom, is the man behind Bioton and holds the majority share in the company, while Polpharma belongs to Jerzy Starak, a pharmaceutical tycoon whose fortune is estimated at some zł.1.1 billion. Both men know how to spot a good business opportunity and now their intuition is translating into huge income. If their winning streak continues, the names of their pharmaceutical enterprises might soon become as recognizable worldwide as GalaxoSmithKline or Pfizer.
