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Pharmaceuticals

Indonesia's first biomedicine factory opens

Kalbe Farma aims for higher margins with biological products

Kalbe Farma President Vidjongtius, right, gives Indonesian President Joko Widodo a tour of the company's new biomedicine factory outside Jakarta on Feb. 27 (Photo from Indonesia's Ministry of Industry)

JAKARTA -- Indonesia's largest pharmaceutical company, Kalbe Farma, inaugurated its first biological drug factory on Tuesday, as it aims to produce higher-margin prescription drugs amid heated competition in the country's pharmaceutical industry.

The factory, run by subsidiary Kalbio Global Medika, sits across an 11,000-square-meter site in an industrial zone in Cikarang, east of Jakarta. Kalbe invested 500 billion rupiah ($35 million) to construct the factory. Another 200 billion rupiah has been set aside to support research and development, and to transfer technology from Chinese and South Korean partners to support the operation, Kalbe said in a press statement.

Kalbe started production trials following the inauguration ceremony attended by Indonesia's President Joko Widodo. Pending the final seal of approval from Indonesia's Drug and Food Monitoring Agency, the company expects to start near the end of this year the commercial production of erythropoietin, a hormone treatment for special cases of anemia resulting from kidney failure and cancer treatment. Cases of cancer, as well as hypertension- and diabetes-induced kidney failure, are rising in Southeast Asia's largest economy.

Kalbe President Vidjongtius said the factory has a production capacity of 9 million units of erythropoietin per year. Kalbe aims to meet domestic market needs for the product, as well as to export it to other countries, mainly in Southeast Asia.

"The inauguration of the factory ... signifies Kalbe's commitment to building independence on raw materials and technological prowess, as well as to boost exports," Vidjongtius said.

Vidjongtius earlier told the Nikkei Asian Review that the new facility will be "the first biomedical factory in Indonesia." It is designed to produce biogenerics or biosimilars, copies of patented biomedical products for which the innovators' patents have expired. Production requires more sophisticated technology than for making most chemical generic drugs. Apart from vaccines and antisera produced by state-owned Bio Farma, most biopharmaceutical products in Indonesia have been imported.

Kalbe aims to break this dependence on biopharmaceutical imports by finally manufacturing its own biogenerics. Local production means lower prices, with which Kalbe aims to grab market share from importers. The inability of most Indonesian drug makers to manufacture biopharmaceuticals allows Kalbe higher margins from its biogenerics, therefore hopefully lifting sales and profits of its prescription pharmaceuticals division.

The division has suffered slowing growth in recent years due to tight competition in Indonesia's crowded pharmaceutical industry which has pressured margins. There are more than 200 industry participants, most of which are locally owned companies competing for a share in the procurement of generic drugs for the government's universal health coverage scheme, BPJS Kesehatan.

Kalbe's prescription drug sales grew only 5% to 4.69 trillion rupiah last year, lower than the 8.7% growth to 6.1 trillion rupiah of its newer nutritional supplement division.

To support its venture into high-tech and higher-margin products, Kalbe partnered with South Korean biotechnology research and development company Genexine in 2016, through the establishment of joint venture Kalbe Genexine Biologics. The venture conducts research and development for new biological drugs, with Kalbio intended to produce them commercially.

After erythropoietin, Kalbio plans to manufacture other biomedical drugs, including granulocyte colony stimulating factor, for white blood-cell recovery after chemotherapy; efepoietin, a long-acting erythropoietin; insulin, a hormone treatment for diabetes; and monoclonal antibodies for cancer treatment.

Nikkei staff writer Wataru Suzuki in Jakarta contributed to the story.

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