"Hungary's leading pharmaceutical manufacturer Richter is planning to establish a new plant to to develop and produce biotech products in Debrecen, investing HUF 15 billion, CEO Erik Bogsch announced in a press conference held jointly with National Development and Economy Minister Gordon Bajnai. Richter will invest HUF 15 billion to build a new unit in Debrecen, eastern Hungary, which will use biotechnology to develop and manufacture pharamaceutical products. The move is an important milestone in achieving Richter's strategic goals, as well as for the development of the competitiveness of Hungary's pharmaceutical industry.
Richter identified biotechnology as a strategic area of development in 2007, prompted by the rapid 17% growth of this USD 60 billion market in the United States in the previous year, Bogsch said. The establishment of a new plant will mark the beginning of a complex biotech product line, while will enable the company to complement its portfolio with a high added-value products.
The greenfield project will create 110 jobs (of which 85 will be in Debrecen) and generate growth in the high added-value professional sector in a region with unemployment problems, and as such has been approved for direct financial aid by the government, Bajnai said at the press conference.
According to Bajnai, the project will receive funding via a governmental investment promotion program in which projects are approved on a one-by-one basis. Although the amount of the funding is still confidential, Bajnai revealed that the package consists of a subsidy plus tax concession. “The plant will receive a large amount of government subsidy, but still within the usual range and framework", the minister said, adding that the exact figures will be released 60 days after the agreement is signed.
Local government approval for the new plant is underway, with construction work to start later this year. Highway access to Debrecen and good industrial park infrastructure played a major role in the choice of location, Mayor Lajos Kósa added.
The financial aid extended by the city of Debrecen will take the form of a local tax concession, with Richter allowed to subtract license fees and research spending from the local tax base. The legality of this is disputed by the central government, and Kósa has taken the issue to the Constitution Court. “In addition, Richter will buy a plot at the city's industrial park at a discounted price, however this is an option available to any other company seeking to establish a presence in Debrecen", the mayor added.
Once operational in 2012, the plant will use insect and mammal cells to produce proteins for therapeutic use. Currently, only two plants of this type exist in Europe. In the first years, Richter will produce samples for clinical trials, with products for the market expected to launch in 2014.
Portfolio.hu viewpoint
In Portfolio.hu's view, the project is good news for Richter investors, as it fits in with the strategic biotech product line launched by the company recently, as part of which Richter and Helm AG jointly
acquired Strathmann Biotec last year.
Another fact that puts the announcement in a positive light is that Richter, which is 100% exempt from corporate tax until 2012 may possibly obtain an extended tax exemption with a new plant becoming operational in the same year."
Source: Portfolio Online Financial Journal
23.07.2008