You're reading: Acino CEO: This is the time to invest in Ukraine

Ukraine's political and economic instability is scaring away many investors, but the market is still attractive for Swiss-based drugmaker Acino Pharma AG.

On Oct. 1,
Acino bought Ukrainian pharmaceutical company Pharma Start. The Ukrainian
firm’s factory will be Acino’s fifth production center in addition to its three
factories in Switzerland and one in Germany.

Acino would
not disclose the value of the deal. Acino itself is jointly owned by Avista
Capital Partners and Nordic Capital private equity funds, which took over the
company for $440 million back in 2013.

“We believe
Ukraine could be a very good market in the future from its low base today, so
we’re quite optimistic for good growth from this acquisition,” Jostein
Davidsen, the CEO of Acino Group, said in an interview with the Kyiv Post. “We
believe that at this moment it is possible to make good investments and do good
business. And we have long-term prospects – at least five years – to grow this
business.”

In fact,
Davidsen sees the current lack of investment in Ukraine as an opportunity
rather than a disadvantage. Acino has been targeting “niche emerging markets,”
where many global companies are not present, and avoiding booming investment
hubs like Brazil, Mexico or China. Instead, they invest in countries where
competition is lower and the markets are only starting to grow.

Buying an
operating and growing business with 40 percent cumulative growth through 2011
to 2014 and $48.8 million revenues in 2014 is a significant reinforcement for
Acino, which reported turnover of $284 million in 2014 and is aiming for
turnover of $1.13 billion over five years. Most of this growth is expected to
come from further similar acquisitions in the region – and another purchase in
Ukraine might be in the works.

“What we’ve
seen is that local manufacturing industry is growing much more rapidly than
import products and international industry because of affordable prices, and
less dependency on the devaluation of hryvnia,” Davidsen said. “So I think this
is a clear advantage, and this is the right thing to do at this moment. You can
take market share, you can build growth, and you can also build a much stronger
position at this point of time on the market.”

The newly
acquired Ukrainian branch of Acino will mostly sell to the Ukrainian market.
The company plans in five years to reach 3 percent market share, up from the
current 1.2 percent, and become one of the country’s top 10 leading local
producers. This is also the timeframe when investors expect the return to start
coming, Davidsen said.

Acino hired
a local manager, Eugene Zaika, who for 10 years worked alongside Davidsen at
Norwegian pharmaceutical giant Nycomed, developing the company’s Ukraine and
CIS division. Davidsen said he trusts the local leadership and is sure they
will both sustain growth and lead the company forward.

There are
no plans for big structural changes in the company, which currently employs
some 450 people, apart from a few new people Zaika is bringing in from his
previous team to key support positions in the company’s legal and
regulatory divisions.

“The
quality and expertise of the people within Pharma Start is at a very high
level, especially when it comes to manufacturing – they all have a higher
education, which is very rare,” Zaika told the Kyiv Post.

Davidsen
echoes this assessment.

“We were
very impressed with the company, its manufacturing facilities, technology, and
the professionalism of the people working there,” Davidsen said.

The
company’s focus will now be on further professional and organizational
development, alongside the introduction of international standards in
production and operations, although that will need some time.

The key
development strategy will be to supply high quality locally manufactured
products at affordable prices.

Davidsen,
who lived in Russia for over 20 years and is familiar with the Ukrainian
market, says he’s very optimistic about the acquisition and hopes that other
investors will follow Acino’s lead and enter the Ukrainian market.

“We believe
that there are good signs here, good political signs, positive trends, and we
hope this will also stimulate other foreign direct investors to invest into
Ukraine in our industry and elsewhere,” he said. “We think we’re participating
in building the country, and in building the market.”

How to succeed in
Ukraine?

Jostein
Davidsen: “People, people and people – that’s the recipe. Key areas for success
are strong local leadership and building a company according to the standards
we have internationally.”

Eugene Zaika:
“I would add agility, time in the market, speed in everything you do, and
adherence to the highest standards of Swiss quality. As long as they trust the
quality, and as long as you deliver Ukrainian-made medicine but with proven
Swiss quality behind it – what else do you need?”

Kyiv Post staff writer Olena
Gordiienko can be reached at [email protected].