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“Who will invest in a country where military actions are taking place? Either one who strongly believes in success, or one who sees the future”

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Eugene Zaika

CEO of the “Acino” pharmaceutical company in Ukraine told why expats, in the majority, are inefficient as managers in Ukrainian enterprises

Moderately strict, but at the same time sensible. Sometimes “quick on hasty decisions”, however he is taking responsibility for the result of each of them. And at the same time he is very athletic and has a sense of humor. Eugene Zaika, CEO of the Ukrainian pharmaceutical enterprise “Pharma Start”, Acino Group, which has been working in the pharmaceutical industry for more than 20 years, leaves such an impression about himself. Eugene proved to his foreign companions that he is like a duck to water in the pharmaceutical market, and any obstacles become a certain challenge for him, and then a prerequisite for success. In 2016, Acino in Ukraine was recognized as the fastest growing company in the country, and Eugene Zaika became a top manager number one in the Ukrainian pharmaceutical industry by the version of Delo.ua.

In a conversation with LDaily, CEO explained why the domestic pharmaceutical industry has increased its capacity during the crisis, and that an investor who is not afraid to enter the Ukrainian market.

: As it is known, on October 1, 2015, the Swiss company “Acino Pharma”, which is successfully represented on the world pharmaceutical market, has bought the Ukrainian pharmaceutical company “Pharma Start”.  Eugene, explain please, what prompted the foreign company to enter the pharmaceutical business in Ukraine during the war and unstable economy?

E.Zaika: Before answering this question, I would like to tell the background of this event. Our current owners, the American “Avista” investment fund and Scandinavian “Nordic Capital” had the experience of doing business in Ukraine before the purchase of the “Pharma Start” company. These funds, together with three partners, were formerly by the pharmaceutical company “Nycomed”, which I also had an honor to work for ten years in. During this time, “Nycomed” achieved high development results, so the owners decided to sell it to the Japanese pharmaceutical corporation “Takeda”.

Today, this case is mentioned in all business schools as the largest sale of the company by the investment fund. “Nycomed” was sold for 9,6 billion euros. This case has become one of the coolest in the global pharmaceutical business.

And after years, two out of five owners of the sold company mentioned above, decided to repeat this successful story again. Therefore, they went again to the Ukrainian market in an unstable time. Not in vain that private equity funds are considered the most risky investors: they come with direct investments in unstable markets that have a great growth potential. And now, they are planning to build a medium-sized international company, which should rich a turnover of 1 billion dollars in 5-7 years.

: What did you face while entering the pharmaceutical market in the economic crisis?

E. Zaika: According to my observations, 2015 is already the beginning of a good period of pharma. We have just entered that year in the fourth quarter, so we have already felt a slight decline in the crisis in this industry.

In general, the unstable economic situation has had a mixed impact on the pharmaceutical market of Ukraine. The active growth fell in 2013: its value at that time was 4,3-4,4 billion dollars. Today the market has shrunk to half, in 2016 it left only 2,2 billion dollars. Of course, all pharmaceutical companies suffered heavy losses in nominated currency. This particularly affected Western companies that imported their products to Ukraine. And as they directly depended on the value of the currency, respectively they had to raise prices for their goods. The crisis has greatly affected the purchasing power of the population, which fell sharply, so Ukrainians had to replace expensive imported products with cheap domestic medicines that were not inferior in quality.

: Do you want to say that the economic crisis has positively affected the domestic pharmaceutical industry?

E. Zaika: That’s right. The Ukrainian pharmaceutical business against the background of the devaluation of hryvnia and the contraction of the market, managed to take part in the market share, occupied by Western industry and improved its positions. It should be mentioned that no pharmaceutical company has cut production. And both in money and packages, domestic companies have increased their share. If earlier 70% of money of the market belonged to Western products and 30% to domestic products, now it is almost 40% are domestic and 60% are foreign. The situation concerning packages has been formed to the exact opposite: 70% of packages are domestic and 30% are imported. Now the indicators are 78% and 22%.

: How many Western companies left the Ukrainian pharmaceutical market because of the situation?

E. Zaika: There were no companies that closed their offices in our country. But there are those producers who reduced their activity in Ukraine, leaving a few products that do not require a large staff for promotion. So they outsourced their main product portfolios other companies for promotions and sales.

: Has the struggle become stronger among competitors?

E. Zaika: Of course, it became tougher, because the number of participants remained the same, but the market volume fell by half. The departure of several companies did not affect the work of 650 enterprises. The pharmaceutics became tougher. If before the domestic pharmaceutical business was losing to the West in both marketing and promotion, now our companies have no difference in the top-10 list from foreign ones.

All the domestic enterprises as a rule have a team, which is formed on 80% from the employees who have come from the Western companies, which have already gained knowledges, experience, and thereby have strengthened the staff of the Ukrainian pharma.

: Tell us please, why did the headquarter of “Acino Pharma” decide to appoint you as CEO of the company in Ukraine, but not your representative?

E.Zaika: Everything is very simple. I have been working in the pharmaceutical business of Ukraine since 1994. Those, who have worked here for more than 20 years, feel very comfortable. But a foreigner who came to manage any business in our country, needs time to adapt and understand the principles of doing business in Ukraine.  And while he sorted out all the subtleties, he will have to go back, because the contract has ended. Therefore, in 90% of cases, sending us an expat is not the most effective solution. There are exceptions, but very rarely.

: Can you ascertain on the example of your company, that the business climate in the pharmaceutical market is attractive to investors?

E. Zaika: If we compare it to the catastrophe that is happening in other business segments in Ukraine, then our market is really more attractive. But we will be watched last in comparison with the development of neighboring countries. While there is a crisis and instability in the country, only desperate people will come here.

Well, who can come with investments in the country, where the military operations are taking place? Either very risky investors who strongly believe in success, or those who see the future.

Our owners really believe in the success of Ukraine and they are not afraid to invest here. But before they bought the “Pharma Start” company, they had been thinking for a long time. That was one of the longest negotiation processes, which lasted almost two years. Now it has been 6-7 quarters since the acquisition of the business. And they did not regret their decision for now.

We are growing at a fast pace, we have good financial and operational indicators. Therefore, now we face number one task: how to increase even more production capacity, since our plant can cover the needs of not only the Ukrainian market, but also the CIS countries, where the company is actively expanding its presence.

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