Sanofi cannot supply insulin from the Oryol plant to Europe

The French pharmaceutical manufacturer Sanofi cannot fully fulfill its obligations under the special investment contract (SPIC). Due to logistical problems, the company almost stopped exporting insulin from the Russian plant to the European Union, and this was one of the important conditions for receiving tax preferences under the SPIC. Lawyers consider the most likely scenario to be a change in the terms of the contract by agreement of the parties.

In 2022–2023, Sanofi practically did not ship insulin produced at the company’s plant in the Oryol region abroad; the last large deliveries were in 2021 to Germany, where 2 million packages were sent, RNC Pharma calculated for Kommersant. Sanofi Corporate Relations Director Yuri Mochalin told Kommersant that additional volumes of the drug were supplied to Germany. According to him, now the Oryol Sanofi Vostok plant, taking into account “the logistical features of the last two years and the current situation,” has focused on supplies to the domestic market.

Sanofi launched a plant in the Oryol region in 2010 as part of a SPIC concluded with the regional authorities and the Ministry of Industry and Trade, which provides preferences, in particular, on income and property taxes. In exchange, the pharmaceutical manufacturer pledged to invest 863 million rubles in the modernization of the enterprise by 2027. Under the terms of the SPIC, Sanofi was supposed to export glulisine insulin cartridges “Apidra,” the Ministry of Industry and Trade explained to Kommersant. They added that, according to reports submitted to the ministry, the investor “does not fully fulfill the export obligation.” The office of the governor of the Oryol region and the regional government did not respond to Kommersant’s request.

According to SPARK, at the end of 2022, Sanofi Vostok’s revenue decreased by 2.5 times, to 1.3 billion rubles, and the net loss amounted to 65.8 million rubles.

When supplying to Europe, Sanofi could have serious difficulties with logistics, agrees Nikolai Bespalov, development director at RNC Pharma. According to him, it would be easier to export to the CIS countries, but the company may not be ready for this.

Among other pharmaceutical manufacturers, according to RNC Pharma, the German Stada, which has a Nizhpharm plant in Russia, continues to supply drugs to Europe. The company ships drugs to Serbia, Lithuania and Latvia, and until 2019 – to Germany. Stada did not respond to Kommersant’s request.

Yuri Mochalin says that Sanofi is doing everything possible to fulfill its obligations under the SPIC. The parties that signed it, as the Ministry of Industry and Trade emphasize, “bear the responsibility established by the contract and current legislation.”

Until March 2022, the investor’s obligations to increase international competitiveness were enshrined in the SPIC through the coefficient of diversification of export supplies, says Roman Tarasov, partner at the Nortia law office. At the same time, a deviation within 20% was acceptable; exceeding this value formally could become grounds for early termination of the contract, the lawyer points out. In this case, the investor must compensate for the amounts of unpaid taxes, fees and pay off penalties, says Vladislav Varshavsky, managing partner of the law firm Varshavsky and Partners.

But in practice, termination of a SPIC is an extreme measure and is used in cases where the investor has completely stopped fulfilling his obligations, points out Roman Tarasov. This happened, for example, with the subsidiary of the Danish wind generator manufacturer Vestas, whose departure from the Russian market resulted in litigation (see Kommersant on July 31).

An investor has the right to demand negotiations on changes to the terms of the SPIC if it proves force majeure or another circumstance that necessitates the need to adjust the contract, notes Better Chance partner Alexander Dolgov. The indicator of supply diversification can also be changed, but this must be approved by an interdepartmental commission, adds Mr. Tarasov. According to Vladislav Varshavsky, the state will take into account the fact that the investor has focused production on providing vital medicine to the needs of the domestic market.

Polina Gritsenko, Anna Zanina