By Dmitry Kryazhev
Last year Vladimir Khristenko vacated the post of president and gave up his equity stake in Nanolek. The company decided on a new direction in May of this year, when legendary pharmaceutical industry manager Vladimir Nesterenko took up the mantle of CEO of the company. He spoke about his vision of the past and future of the immunobiological market as well as Nanolek's plans in an interview with Dmitry Kryazhev, publisher of Vademecum.
– There have been many interesting cases in your career. You've managed retail, distribution, and manufacturing companies, and were even a civil servant. And you were particularly involved in the creation of Microgen 20 years ago. That is to say, you were part of the very foundation of the immunobiological market that grew out of that reform. What kind of industry developments were seen back then?
– The early 2000s was a time when the state was able to turn its attention back to restoring the country's immunobiological security system. At that time there were 13 businesses with corresponding portfolios scattered around Russia, all operating independent of one another. And while they were all state-owned, there was very little order in their activities. Most of the sites were old, some I'd say, were even ancient factories. Production facilities and equipment were on their last legs. At the time, both the government and the Russian Health Ministry believed that the only way to solve the issue of reviving domestic immunobiology was by combining all these assets into a single state-owned company. This process, however, wasn't exactly linear due to the extraordinary times we were living in. The enterprises were, as they used to say, managed by "red" directors who had grown into them and thought of these enterprises as their personal property rather than being owned by the state. Each one of these bosses needed to be negotiated with individually. Some immediately snapped a salute and backed the idea, while others caused chaos and disturbance among their work teams, spreading rumors about the privatization or closure of the plants, etc. But finally, despite all of the difficulties we encountered, we were able to bring this plan to fruition.
– As far as I recall, the creation of Microgen was overseen by then Deputy Health Minister Anton Katlinsky.
– Yes, Anton Vikentievich. He won the competition to head Microgen soon after the arrival of the new government and new leadership coming to power in the Ministry of Health. He held the post for five years. It was actually during this period that the industry configuration we are witnessing now was formed. A single state-owned enterprise, a transparent system for unified state procurements for immunobiological products was formed, and a National Immunization Calendar (NIC) was created.
– For most of the early 2000s the vaccine market itself (mainly the NIC) was conservative, if not to say uneventful, especially against the backdrop of the launch of the Supplemental Drug Coverage (SDC) program. The latter rapidly reprogrammed the entire state order in pharma and greatly influenced the development of the healthcare system in Russia.
– There are several explanations for that as well. First off, the SDC itself took over a significant portion of the healthcare budget. Second, the peculiarities of the legislation regarding unitary state enterprises, meant that the development of Microgen, wouldn't be rapid. The profitability of the assortment back then was rather low. It was nearly impossible for a state-owned enterprise to get money from a bank for re-equipment purposes and organizing developments. Looking in from the outside, the situation had already changed for the better in the next decade, when Microgen entered into the fringes of Nacimbio. Third, the very idea of immunobiological safety is something that doesn’t need any commotion. It's also important to note that private companies, both Russian and foreign, have quietly developed and are developing on the market. A commercial vaccine market has formed alongside that of the state market, and believe me, it's very far from being saturated. The first private domestic company, Petrovax, has seen decent growth. And later that very same Anton V. Katlinsky built a modern vaccine production plant called Fort near Ryazan, then there was the appearance and development of Nanolek. And the COVID-19 pandemic has since become a trigger for domestic pharmaceutical companies to direct efforts towards vaccines.
– That's all true. But improving the NIC, that is, the creation of new market is a tricky topic in itself. Let's recall Pfizer's breakthrough with a pneumococcal vaccine in the calendar. Very soon it will be ten years since this event occurred. It generated enormous interest in the market, particularly by Big Pharma companies. Over the years their lobbyists have argued vociferously, yet such prevention items as human papillomavirus (HPV), rotavirus, and meningococcal infections are still on the waiting list.
– There are several factors involved here. The NIC isn't only a guaranteed market for sales, but the most massive in terms of state procurements. Each and every vaccine campaign means the release of hundreds of thousands, even millions of doses of vaccines. It's evident that the state, as both a customer and guarantor of the nation's welfare, needs certain guarantees from the manufacturer, wants to see comprehensive localization of the product. And a total technology transfer, especially in such a sensitive area as immunobiology, is a very challenging task. The global vaccine manufacturers didn't take a stab at building full-cycle plants, and the number of Russian partners capable of localization can be counted on the fingers of one hand, as mentioned above. Nanolek's experience in localizing Pentaxim speaks volumes about what a complex, long, and time-consuming this process is. How much due diligence the company has had to go through! Our partners are scrupulous in their study of compliance with the tech cycle, transportation, and storage conditions. That's why it's important to note that the NIC is not a closed market, but it will always be a reasonably conservative one, and will impose a host of conditions on applicants for inclusion in the calendar, no matter whether we're talking about a domestic or foreign manufacturer.
– By the way, how are relations with foreign partners developing at present?
- All of the projects that have been started are still ongoing. In particular, the localization of the release of a meningococcal vaccine is in full swing. We hope that all the conditions for it to be included in the NIC will be met by 2025. And it's clear to us that the calendar will develop and the market will grow, again, simply due to the shift in healthcare focus from treatment to disease prevention. And the more developed and competent local producers are, the more flexible the system for access of their products to the guaranteed and mass market will become. We can once again turn to Nanolek, where an HPV vaccine is also on its way to being registered. This time it is part of our collaborative effort with Combiotech, a research and production company. When making an investment in Combiotech, the company doesn't look back and wonder if there will be a "empty spot" for it in the calendar. There is a global trend and we're part of it. This development, moreover, opens up export opportunities for Nanolek as well. There aren't many manufacturers on the HPV market. Several countries in Southeast Asia and the Commonwealth of Independent States have already taken an interest in our product. I think our suggested price will be more competitive than that of global manufacturers.
– And what areas do you plan to develop for the domestic market?
– We want to become an active player on the adult vaccine market. We're now actively studying this area, trying to grasp which products will be in demand.
– But this isn't the NIC. You're talking about the purely commercial market now where there are different laws of demand.
– Of course. That's why we're taking a careful look at it. We're balancing our capabilities against the needs of healthcare.
– Veterinary medicine is also a very receptive and interesting market.
– Absolutely. The vaccine market in animal husbandry alone is 30 billion rubles annually. But entry into this market will require large-scale investments and the construction of a separate new enterprise next to the existing one. First and foremost, it's important to understand who we can work with as partners to enter this high-capacity niche, whose expertise we can rely on.
– Let's jump back to the present. You've been working at Nanolek for less than a month, but you've probably got on the ball already. What's your overall impression?
– Well, you know about my diverse managerial experience. And with this in mind, I can say that I was surprised to learn what a nice and first-rate company founders Vladimir Khristenko and Mikhail Nekrasov were capable to build. Mr. Khristenko was responsible for development, strategy, and partnerships, while Mr. Nekrasov was in charge of production. Competent management, an excellent plant in Kirov, whose creation laid the foundation for further development of capacities, and a professional, motivated staff at the enterprise. In fact, Nanolek already achieved sustainable growth under Khristenko. The days of the company's formation are long gone.
– If I remember correctly, Nanolek reached its planned profit by the end of 2021. And around the same time there was information that Khristenko wanted to quit as one of the founders and was considering buyers to take over his shares.
– The reasoning behind it was purely business-related and Khristenko's decision to sell his stake in the firm had nothing to do with the risk of sanctions. When I joined Nanolek, I familiarized myself with the company's paperwork. The company left the investment phase in 2019, which is quite quick for this niche market. This cycle usually takes 8 to 10 years for vaccine manufacturers. The consistent growth of revenue and profit has begun. Vladimir began negotiating the sale of his stake in 2021, and in 2022 he sold it to both partners and management. He then handed over his workload to vacate the post of president by the end of last year.
– So you haven't crossed paths with him yet?
— No. He has nothing to do with either Nanolek or the Russian pharmaceutical business as a whole now.
– As we've already touched upon, you've had several interesting cases in your career. The most memorable for me personally was the relaunch of the wholesaler GDP as part of the 36.6 Group as a distributor on the state procurement market. It turned out to be an interesting story. Is it possible to create something similar with Nanolek?
– We work as a distributor for a number of high-tech products, mainly those whose secondary packaging we localize at the Kirov plant. This brings the company a nice sum in terms of additional revenue. Obviously, there's more to be done in this direction, we could strengthen it. But this isn't of paramount importance. The production of vaccines will remain our primary focus. There will be a lot of work to expand our portfolio.