Chemical and pharmaceutical industry in Serbia
The chemical and pharmaceutical sectors are traditional industries with long-standing traditions in Serbia. Today the production volume of the chemical industry is on the rise, a current report by the Development Agency of Serbia (RAS) states.
“By far, the petrochemical Industry is the strongest performer in the group, followed by Pharmaceutical and Rubber and tires Industry. Production volume of pharmaceuticals increased by 17% in 2015 while rubber and plastics achieved growth of 6,1% and chemicals and chemical products 2,7%, compared to the previous year. In 2015 the chemical, rubber products and non-metallic minerals achieved USD 1,82 billion of exports, which is 13,5% of Serbia’s total exports value and 15,0% of exports of countries processing industry”, the Agency’s statistics show.
The Serbian pharmaceutical market is one of larger markets in Central and Eastern European region. The market for pharmaceutical products in Serbia is constantly growing both in terms of value and volume of products sold on domestic market. The estimates for 2015 indicated that the value of pharmaceutical market in Serbia surged by 2,54% compared to the previous year reaching close to EUR 900 million, with significant growth of products packed in boxes (7,13%), the Serbian Investment and Export Promotion Agency (IEPA) announced.
History of the chemical industry
The introduction of the chemical industry in Serbia started in the 18th and 19th century with the manufacture of gunpowder, candle wax, soap, paints, coatings and pharmaceuticals.
The period between the two world wars was marked by serious surge in production capacities, especially in light chemicals, but that period was also important for establishment of the base chemical industry, with factories producing sulfuric and hydrochloric acid, bile salts, iron sulfate and copper sulfate in Subotica. Also, there were significant achievements in development of manufacturing capacities for tar, asphalt, rubber, industrial gases and other chemical products, RAS informs.
The most successful period for chemical industry, as well as for the complete industry of Serbia, were the 1970’s. Concerning effects of erected manufacturing facilities, the most favorable times were the 1980’s, when chemical industry and rubber industry of Serbia had 6 to 8 thousand of various products in their production programs and global production volume at the level of 8-10 million tons per year.
Record volume of production in the chemical industry was achieved in 1989 and in the rubber industry – in the middle of the 1980’s. In 1989 a record was reached in employment, which equalled about 63 000 in chemical industry and 20 000 in rubber industry, and also in share of chemical industry and rubber industry in gross domestic product of industry, which was 10,6%. Record export level of chemical goods of around USD 600 million, which was approximately 11% of the value of the total export of Serbia, was reached in 1990, a special report by the Development Agency states.
Structure and capacities
The chemical Industry in Serbia today consists of more than 1500 companies active, which in 2014 contributed to the GDP with 2,2% and employs over 32 000 people. “Unlike the average of the Serbian economy, chemical industry was more resilient to the impact of global financial crisis and proved to be more dynamic and healthier. There is significant growth recorded both in terms of production volume and exports, while the sector has suffered a drop in total employment by more than 3500 people, mostly due to reduction of jobs in socially owned big pharmaceutical companies”, the Agency further explains.
The structure of Chemical Industry in Serbia includes several major subsectors:
Base chemicals and chemical products (base chemicals, fertilizers, plastic granulates, industrial gases, bases for colors and varnishes, basic non-organic chemicals, synthetic rubber); Pesticides and agriculture chemicals; Paints, varnishes, dyes, printing colors and fillers; Detergents, soaps and cleaning products; Other chemical products (glues, ether oils);
Rubber and plastic products (rubber tires, other rubber products); plastic profiles; plastic packaging; plastics products for construction purposes, etc.);
Non-metal mineral products (glass products, fireproof products, ceramics, porcelain, grinding products and agents);
In 2015 the number of employed in the chemical and pharmaceutical industry was over 32 000. The most populated sector is by far Rubber tires for vehicles, providing permanent employment for more than 5300 people and growing in numbers on annual basis.
Over the past decade, since the global financial crisis broke out, the number of employees in the sector has been reduced significantly, leaving experienced and skilled technicians and engineers looking for alternative opportunities, the local Investment Agency points out.
“It is estimated that more than 20 000 people in this field had lost their jobs in this sector from 2008 up to now. By far the biggest reduction in jobs was in the pharmaceutical industry sector, where more than 2000 people have lost their jobs in the last years. Combined with constant inflow of qualified pharmaceutical engineers from Universities and Colleges, this creates resourceful labour pool for new investors to come”, the Agency reports.
The average salaries in the pharmaceutical sector are usually quite higher in comparison to those in the processing industry in Serbia, mostly due to the higher educational and skill level needed for manufacturing processes, higher capital intensity of investments in this field and overall growth rate in most of the sectors. The pharmaceutical industry though makes an exception with average salaries which are almost double than in the processing industry, RAS further informs.
Petrochemical and rubber and tire industry
The petroleum refining and the petrochemical industry are a leading pillar of the global energy and industrial markets. In many countries these sectors function as the economic backbone of national economies.
“The entry of the petrochemical industry into Serbia dates back in the 1970’s. Between 1975 and 1985 several high-tonnage capacities for manufacturing of basic petrochemicals and their derivatives were brought on-stream, such as facilities in the company Petrohemija from Pancevo (200 000 tpy of ethylene, 85 000 tpy of propylene, 45 000 tpy of C4-fraction, 100 000 tpy of VCM and other by-products), then in the company FSK from Zrenjanin (45,000 tpy of 1,3-butadiene, 35,000 tpy of MTBE and 22,000 of Raffinate-2) and finally in the company Methanol-Acetic Acid Complex (MSK) from Kikinda (200 000 tpy of methanol and 100,000 tpy of acetic acid)”, the Agency reports.
Today, the base petrochemicals produced in Serbia are internally converted into more profitable derivatives at low percentage (excl. ethylene and butadiene), almost as it was in the late seventies of the previous century. A smaller part of basic petrochemicals is sold in the country (as low profitable semi-finished goods), and the rest is exported.
The petrochemical industry of Serbia has been always significantly oriented towards export. With exception of Romania, all countries of Central and South-Eastern Europe are dependent on imports of crude oil and natural gas, according to the Development Agency of Serbia. On the other side, this region has a significant number of process plants to produce basic petrochemicals – finished commodities that are not profitable enough to withstand the high costs of transport to distant destinations, limited regional demand and relatively small installed capacities, RAS explains.
In the rubber and tire industry there are three important manufacturing sectors – pneumatics, rubber-technical goods and rubber footwear. This industrial branch was developed from handicrafts, especially manufacture of rubber based technical goods and rubber footwear that existed even before First World War. Today’s Serbian rubber industry shows a rather great development potential. In 2004 it almost reached the historical record level of foreign trade achievements since the value of export overcame EUR 186,6 million, according to the officially reported data.
The pharmaceutical sector in Serbia, as the one of the most important industries, is closely connected to the transforming of complete political and economic environment. In a research dedicated to the current state of the pharmaceutical industry in the country the local Investment and Export Promotion Agency says that changes in this area must follow changes in the state policy toward healthcare in general.
Efficiency increase in the healthcare system of Serbia depends on the ability of generic pharmaceutical companies to deliver high quality and cheap generic medications to the market. Pharmacy is the activity regulated in detail, with precisely specified rules for each stage a drug or a medicament shall pass through before it can be prescribed to patients. The Serbian Drug and Medicaments Agency is given the task of regulating the Serbian pharmaceutical market.
Its competence is not limited only to issuance of the licenses and placing of drugs on the list, but Agency also issues licenses for clinical testing of drugs and medicaments; monitors undesired reaction to drugs; approves advertising of drugs and medicaments; exercises quality control of drugs and medicaments and engages in other task and assignments specified by the law.
The drug production in Serbia includes the complete drug production process or certain parts of the production process, active substance production, raw material procurement, drug quality control and market release of drug batch, drug storage and distribution. By definition, a production process is any procedure applied in the drug production, form the receipt of raw materials, production, packing in interior packaging, up to the labelling and exterior packaging.
According to the local Investment and Export Promotion Agency, more than 30 pharmaceutical companies perform their business activities in Serbia. The Serbian pharmaceutical market splits between domestic production and imports of pharmaceuticals from foreign multinationals, as the country is home to several, large generic drug makers such as state-owned Galenika, Strada subsidiary Hemofarm and Actavis subsidiary Zdravlje.
Most multinationals are involved in the Serbian market through imports of their product portfolios or through licensing and marketing agreements with local players.
Novo Nordisk is one of the leading players on the market, with other multinational companies in Serbia including Roche, Merck, GlaxoSmithKline, Pfizer, Sanofi, Abbot, Janssen-Cilag and Astra Zeneca. About 70 foreign companies have representative offices in the country, with the majority being members of the Association of Foreign Pharmaceutical Manufacturers in Serbia, the Agency reports.
“Out of all drugs sold in Serbia in 2015, 64% are produced in the country, while 38% are imported from other countries. Top 20 companies in pharmaceutical sector are holding almost 55% of sales volume in Serbia. The biggest share by far is reserved for Hemofarm Vrsac with 14,53% of market in terms of value of drugs sold and more than 30% share in number of boxes. Other 3 big producers from Serbia (Pharmaswiss, Galenika and Actavis) are also positioned within top 5 companies, totalling close to EUR 210 million in value of drugs sold in the country”, a report by the Investment and Export Promotion Agency states.
Serbian pharmaceutical companies have strategically positioned themselves to take advantage of global trends in the sector. Companies like Hemofarm and Galenika, who have invested substantial capital into development, are expanding the frontiers of medicine in the region.
Other companies, like Zdravlje Actavis and the Icelandic owned Actavis company who is one of the leading manufacturers of generics in Serbia, provide access to low cost drugs to those who might otherwise not be able to afford them.
Furthermore, Serbia has various business incentives, such as tax breaks, cost efficient labour and skilled workforce, which help companies manage costs. “Investment in the burgeoning Serbian pharmaceutical sector is still in its infancy. The pharmaceutical giant GlaxoSmithKline made a substantial investment in the Serbian pharmaceutical company Hemofarm. Many investment opportunities exist for companies looking to grow their product portfolios, expand into new markets or simply reduce manufacturing costs”, IEPA informs.
Drug market and manufacturing
The Serbian drug market is dominated by large drug manufacturers like Hemofarm Concern, Galenika and Zdravlje Actavis. After acquiring several pharmaceutical companies (Panfarma, Zorka Pharma and Hemomont) Hemofarm Concern was positioned among the market leaders on the Serbian market.
The Leskovac-based Zdravlje was acquired by Icelandis Actavis in 2002 and its market share has been increasing ever since. Galenika used to be the leader in the Serbian pharmaceutical industry but unresolved ownership relations and a few years of stagnation resulted in the loss of its market position in the past decade. Overall, smaller players in the sector have made their presence felt by targeting specific areas of pharmaceutical production.
“Serbia’s pharmaceutical industry is characterized by its efficient utilization of available resources and high levels of production. It has achieved relative success but requires additional capital and investment to compete globally presenting an excellent investment opportunity for a joint business venture”, IEPA’s report says.
Since there is no production of Active Pharmaceutical Ingredients (API) in the country, except for Galenika which produces certain pharmaceutical raw materials based on synthesis and biotechnology, these ingredients must be imported. Additional pharmaceutical ingredients such as vitamins, alcohol and corn starch can be sourced locally, but the rest must be also imported.
In addition to customs duties levied on import of such items at the rate of 1%, they are subject to an 18% VAT. Packaging materials such as cardboard, foil for blisters, plastic and rubber packaging materials can be obtained from local suppliers. Glass packaging, bottles and ampoules, which meet EU standards, need to be imported, the Investment and Export Promotion Agency further informs.
In the current issue of the South-East European Industrial Market magazine we will briefly present several of the leading chemical and pharmaceutical companies in Serbia, listed in alphabetical order.
Based in Belgrade, the chemical manufacturer Eucom has almost two decades of experience on the Serbian market. The company continuously developed services of export, import, re-export, wholesaling and production of polyethylene packaging, polypropylene and PVC products – PVC foils, PP tapes, PP binders. It is also specialized retail and wholesale of chemical products.
Eucom’s portfolio of also includes: base chemicals (caustic soda, soda ash – light and dense, sodium bicarbonate, phosphoric acid, sulfur powder, corn starch, methanol, potassium hydroxide, sulfuric acid, borresperse NA220 – sodium lignosulfonate, guar gum, ammonium nitrate, copper sulfate, etc. The company offers general chemicals as well: raw materials, PET granulate, PVC powder, DOP (dioctyl phthalate), hlorparafin, sodium nitrate technical, zinc sulfate chlorine-paraffin, sodium-nitrate technical grade, zinc sulfate heptahydrate, boric acid, borax decahydrate, chromic acid, sodium dichromat, HMTA (hexamethylenetetramine), petrochemicals, etc.
Galenika has been producing drugs, other pharmaceutical products and raw materials for 60 years. Established in 1945, it became the fourth company in the world to produce penicillin. Currently, Galenika has a 30% share of the domestic pharmaceutical market and a well-trained marketing department. The company also has the necessary expertise, R&D and technologies to take advantage of both domestic and foreign markets. This includes licensing agreements and technology transfer based on long-term cooperation with international companies.
In terms of exports, the most interesting export markets for the company are the former USSR, Baltic States and ex-Yugoslav republics. Also, Africa and the Middle East present opportunities for a large transfer of knowledge, the company informs.
Galenika has over 2800 employees. Modern technological solutions enable Galenika to produce over 95% of current galenical forms. Manufacturing is organized according to modern standards and specific requirements of the industry. There are four programs: Human Drugs, Dental, Veterinary and OTC products, and six departments based on pharmaceutical forms.
Founded in Vrsac on in 1960, Hemofarm is the leading generic pharmaceutical company in Serbia and in the region, according to a report by the Serbia Investment and Export Promotion Agency.
Since 2006, Hemofarm has been a part of the German STADA Group, one of the largest generic pharmaceutical companies in the world. STADA has invested a total of approximately EUR 150 million in Serbia since the integration of the largest Serbian health company into the Group in 2006.
Hemofarm is a leader in the Serbian pharmaceutical market with a 17,3% share in financial terms. And with a 79,1% share in the export of Serbian pharmaceutical products. Hemofarm produces over 4 billion tablets and capsules a year. Product range includes more than 250 products from different categories.
“Hemofarm is a company with four decades of experience in drug production. Over the course of the last decade, Hemofarm experienced large levels of expansion. Today, it is a Group made up of the parent company and 21 subsidiaries, of which 12 are in Serbia and Montenegro, and the others are abroad. The parent company is organized according to the division principle. The seat of the parent company is in Vroac”, the Serbian Investment and Export Promotion Agency further informs.
Hemofarm invested EUR 92,5 million in new production capacities. An infusion solution plant was reconstructed and a freeze-dried forms (injectables) and ampoules factory was constructed and equipped.
Pharmanova is domestic, private company established in 1991. It is a manufacturing company which produces pharmaceutical products. During the years, Pharmanova passed a developmental path from pharmacy in Batajnica, over the operating system which included network of pharmacies, to its current status – one of the biggest producers of medicines, medical devices and dietary supplements in the country. Pharmanova operates a modern factory which meets the strict standards of The European Union.
The manufacture plant, placed in Obrenovac, started working in December 2008. It was built under the all principles of the good manufacturing practice, the company claims. Pharmanova has its own control laboratory, in which physical, chemical and microbiological reactions of starting and packing material are performed, intermediate and semiproducts, and finished products are tested, and also ambiental conditions in producing process are controlled.
Pharmanova’s portfolio includes generic medicines which are applied in treatment of skeletal and joint, cardiovascular, gastroenterological diseases and antibiotics.
Tigar Chemical Products
Tigar Chemical Products is the youngest plant within the corporation “Tigar”. Products from the factory’s program date back to 1937 when the “Tigar Industrial Workshop, Dimitrije Mladenovic Gaga and company” began with the manufacture of adhesives for the needs of the internal production of rubber footwear.
“Until 1962 this production was only meant for internal purposes as a semi-product. In 1990 has followed further expansion in the capacitive and personnel sense, and the previous work unit of the factory “Footwear” has grown into an independent factory “Adhesives”. This is the moment when production for external markets exceeded the production for internal purposes”, the company informs.
In 1998, the factory gets a new name “Chemical Products”, because in the meantime, besides the production of adhesives, there have been developed many new products for the manufacturing and chemical industries as well as for the household consumption. Since 2003, the plant began to operate as an independent entity.
West Pharmaceutical Services
West Pharmaceutical Services Beograd Kovin is a dynamic and developing company based in Serbia and Montenegro, with an extensive presence in the local market. It is a subsidiary of US-based West International Group and its activities are focused in the pharmaceutical packaging materials sector. West Pharmaceutical Services is a legal successor of the former Pharma Gummi Beograd Kovin which was founded in 1978. The company produces rubber stoppers for vials containing penicillin and other antibiotics, IV platelets and plungers for pre-filled and disposable 3-piece syringes.
Currently, the company has 140 employees. The company decided to extend its production capacity and invest nearly EUR 10 million in coming years. The first phase started in with the construction of a new production building. The operations are primarily focused on export. The investment generates new jobs in the local area.
Zdravlje is a leading manufacturer of drugs for gastroenterology and cardiology and one of the largest drug manufacturers in Serbia. The company is based in Leskovac in Southern Serbia and currently employs around 1300 highly qualified professionals.
It was established some five decades ago and, after being acquired by Actavis Group in 2002, became part of this Iceland based pharmaceutical multinational company. In addition to manufacturing products for various well-known European pharmaceutical companies, Zdravlje produces more than 100 registered drugs and preparations in the form of tablets, capsules and ampoules.
After taking over Zdravlje, Actavis has invested some EUR 6,9 million in 2004 and another EUR 5,7 million in 2005, mostly in reconstruction of the pharmaceutical sector, GMP standards, logistics and education of its workforce. By the year 2007, Actavis invested a total of EUR 20 million in Zdravlje. While holding a strong position on the Serbian market, the company today continues to develop its sales presence in a number of neighbour countries.
Sources: Serbia Investment and Export Promotion Agency, Development Agency of Serbia (RAS),
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